Holding

An extended marine insurance policy, when enlarged by additional premium, covers storage risk until the goods reach any destination within India, making the insurer liable for the loss.

Summary

The respondent, a shipper of sugar imported from China, purchased a marine insurance policy which was later extended for inland destinations in India upon payment of an additional premium. The sugar, stored temporarily in sheds at Calcutta port, was destroyed by fire. The insurer denied liability, arguing the extension covered only transit risk, not storage risk. The National Consumer Disputes Redressal Commission held that the extended policy, being an enlargement of coverage, continued to protect the goods until they reached any destination within India, and awarded compensation with interest. On appeal, the Supreme Court affirmed the Commission’s view, emphasizing that policy interpretation must give effect to the parties' intention and the extended terms, and modified the interest to accrue from the date of the Commission’s order. The appeal was dismissed.

Issues considered

The scope of coverage under an extended marine insurance policy – whether it includes storage risk after discharge at the port of discharge.
Interpretation of the term 'extend' in the context of insurance contracts.
Whether the insurer is liable for loss caused by fire to goods stored in transit sheds after the original policy was extended.
The appropriate quantum of interest on the awarded compensation.

Legislation cited

Marine Insurance Act

Subjects

marine insurancepolicy extensiontransit riskstorage riskcontract interpretationconsumer disputeinterest modificationinsurance claimfire loss

Judgment

._,...-
A UNITED INDIA INSURANCE CO. LTD.
V.-
MIS. GREAT EASTERN SHIPPING CO. LTD. ,•

JULY 16, 2007

B [A.K. MA THUR AND TARUN CHA ITERJEE, JJ .]

Insurance-Marine insurance policy-For import-Storage ofthe goods
at the port~Extention of policy for up-country destinations-Destruction of
c the goods during storage-Claim for insurance-Repudiated by Insurance
Company-Taking plea that extended policy covered on~v transit risk and
not storage risk-Consumer Commission decreed the claim-Held: In view
of the extended coverage on higher premium, the policy also covered the
storage risk till the goods reached its destination-Quantum of compensation
upheld-However, commencement of payment of interest modified
D ·-
Interpretation of Documents-Interpretation of Policy-Principles-
Held: Jf'hile interpreting a policy, courts should keep in view intention of
·-
parties as well as words used in the policy.

Words and Phrases- 'Extend'-Meaning of
E
Claimant-respondent, in connection with import of sugar from China to
Calcutta, took a marine insur;rnce policy from the appellant-insurer. The
policy was further extended for up-country destinations in India on payment
of additional amount. The sugar was tern porarily stored in T-sheds at Calcutta
port en-route up-country destinations. The sugar bags got destroyed as fire .._
F t
broke-out in the shed. Respondent claimed the insurance for the loss.
Insurance company appointed two surveyors who computed the quantum o~
compensation. The claim was not settled. Respondent filed complaint before
National Consumer Disputes Redressal Commission. Insurance Company I
repudiated the claim on the ground that the claim was not maintainable as
G the extenstion of the policy covered only the transit risk and not the storage
risk. The Commission decreed the claim ori the ground that the insurance
coverage was valid till the goods were delivered to the consignees' warehouse
:I r
or other final warehouse or the place of storage at the destination. Commission
quantified the amount of compensation accepting the report of the surveyor.

H 350
U1'1TED INDIA INSURANCE CO. LID. 1·. GREAT EASTER.'! SHIPPING CO LTD 35 J

-.... It granted interest @ 9% from the date of report of Surveyor. Hence the A
present appeal.

Dismissing the appeal, the Court

HELD: 1.1. While interpreting the policy, the courts should keep in view
the intention of the parties as well as the words used in the policy. If the B
intention of the parties subserves the expression used therein then the
> expression used in that context should be given its full and extended meaning.
In the present case, as is apparent on reading of the Institute Cargo clause
and the coverage, terms of the policy and the extended coverage, the intention
that appears from these terms and conditions that the goods were first covered C
from port in China, destination in Calcutta port and thereafter extended
coverage was sought and in that it was extended to any part of the Republic of
India. If these two terms of the policy are read in conjunction then it clearly
transpires that the goods are covered till they reach the destination in any
part of India. If the extended cover would not be given the policy would extend
to Calcutta port. If this extended coverage is not interpreted to mean that goods D'
should reach the destination in any part of India, then the extended coverage
on payment of higher premium would be meaningless. The coverage was sought
because the final destination of the goods was not at Calcutta port. When the
coverage was extended on same terms and conditions that would mean that
the goods were covered till the same reached in any part of the country in
India. Since the goods were covered from Calcutta port till the same reach its E
destination and they were lying on storage, that would cover the goods by the
extended policy and the insurer cannot defeat the claim of the claimant that
the goods once reached the destination at Calcutta, the policy stood discharged.
(Para 17) (363-A, 8, C, D, E, F]
F
Shashi Gupta (Smt.) v. Life Insurance Corporation of India and Anr.,
(1995) Suppl. I SCC 754; Life Insurance Corporation of India v. Raj Kumar
Rajgarhia and Anr., f 1999) 3 SCC 465; United India Insurance Co. Ltd v.
Pushpalaya Printers, (2004) 3 SCC 694; Oriental Insurance Co. Ltd v. Sony
Cher(van, (1999) 6 SCC 451; Mis. Peacock Plywood Pvt. Ltd. v. The Oriental
Insurance Co. Ltd, JT (2007) 1 SC 191; Polymat India (P) Ltd. and Anr. v. G
National Insurance Co. Ltd. and Ors., f 20051 9 SCC 174 and General
Assurance Society Ltd v. Chandumull Jain and Anr.. f 19661 3 S.C.R 500,
relied on.

John Martin of London, -Ltd v. Russell, (1960) Vol. I Q.B. (Com.Cr.)
554 and Bayview Motors Ltd. v. Mitsui Marine and Fire Insurance Co. Ltd H
352 SUPREME COURT REPORTS [2007) 8 S.C.R.

A and Ors., (2003) Vol. IC.A. 131, referred to.
...
""'
1.2. To extend means to enlarge, expand, lengthen, prolong, to carry out
further than its original limit. Extension, according to Black's Law
Dictionary, means enlargement of the main body; addition of something
smaller than that to which it is attached; to lengthen or prolong. Thus
B extension ordinarily implies the continued existence of something to be
extended. (Para 71 (356-F, GI
...
Provash Chandra Dalui and Anr. v. Biswanath Banerjee and Anr., (1989)
Supp. I SCC 487, relied on.

c The Bayview Motors Ltd. v. Mitsui Marine and Fire Insurance Co. Ltd.
and Ors., (2003) 1 Lloyd's Law Reports 131 and John Martin of London, ltd.
v. Russell, (1960) 1 Lloyd's ListLaw Reports 554, referred to.

The law Lexicon; K.J. Aiyar 's Judicial Dictionary; Black's Dictionary
of Law (Fifth Edition), referred to.
D
2. The compensation granted by the Commission, cannot be said to be
in any manner bad as both the Surveyors were of the appellant company and
the appellant company cannot possibly deny the amount of compensation
arrived at by these surveyors. However, the order of the Commission with
regard to interest is modified. The Commission has granted interest@ 9%
E
from the date of report of the Surveyor but the said order is modified and it is
directed that the claimant will be entitled to interest at the same rate from
the date of the order of the Commis.si~n instead_ofthe date of report of the
Surveyor. lfara 181 j364-B, C, DI

F CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2319 of2004. ..
From the Judgment & Order dated 27 .1.2004 as corrected/modified by
order dated 30.01.2004 of the National Consumer Disputes Redressal
Commission, New Delhi in Original Petition No. 53 of 1996.

G Vishnu Mehra and S.N. Bhat for the Appellant.

Anil B. Divan, Mahesh Agarwal, Rishi Agarwal, Gaurav Goel, E.C.
Agrawala, Varun Mathur and Neha Aggarwal for the Respondent. )I

The Judgment of the Court was delivered by
H
UNITED INDIA INSURANCE CO. LTD. 1·. GREAT EASTERN SHIPPING CO. LTD. [A.K. MAlllUR,J.) 353

...... A.Jq. MATHUR, J. I. This appeal is directed against the order passed A
by the .National Consumer. Disputes Redressal Commission, New Delhi
(hereiQ'after referred to as 'the Commission') whereby the Commission has
allowed the claim of the respondent to the tune of Rs. 4,94,22,000/- and
directed.the appellant-Insurance Company to pay the said amount with interest
at the rate of 9 % per annum from the date after two months of the survey
report by the Apex Surveyors Pvt. Ltd. i.e. from 1.3.1995 till its payment. B
Aggrieved_ against this order of the Commission, the present appeal has been
).
filed by the appellant-Insurance Company.

2. Brief facts which are necessary for disposal of this appeal are that
.. the claimanHespondent is engaged in import of sugar and other items and
in connection with import of 12,000 metric tons of sugar from China to
c
Calcutta the respondent had taken an insurance policy for which cover note
dated 9.6.1994 and policy was valid from 23.9.1994 i.e. from the date of issue.
The policy was further extended by endorsement dated 28.9.1994 for up-
-- country destinations in India. It was alleged that after taking delivery of sugar,
the bags could not be transported from the dock area because of Durga Puja D
__, celebrations and as a result of which all activities ·including transportation
facilities virtually came to a stand still from IO. l 0.1994. Therefore, in all 82,237
bags of sugar were temporarily stored in T-sheds at Calcutta Port area en
route up-country destinations. On 21. I0.1994 fire broke out in the godown
and destroyed the entire stock of sugar bags. Hence, a First Information
Report was lodged and the appellant-Insurance Company was also informed
E
by the respondent. The appellant appointed Mis. Apex Surveyors Pvt. Ltd.
on 22.10.1994. On 24.10.1994 the Surveyors wrote to the respondent asking

-
for the books of accounts and stock register and also took the spot inspection.
The appellant appointed one N.V.P. Sharma Associates Pvt. Ltd. as another
additional surveyor. Since the claim was not settled by the appellant-Insurance F
Company, the respondent filed the present complaint before the Commission
on 21.3.1996. The appellant on 6.5.1996 repudiated the claim of the respondent.
The letter dated 6.5.1996 reads as under :

"The unsc j remaining bags of sugar were taken to three different
private godown outside the poi premises. The fire broke out on the G
26th day after the cargo was stored. This storage was general storage
other than the "in the ordinary course of transit". The case falls under
'"' )(
Clause 108, 102 & 2.1 of the Institute Cargo Clause (a) of the policy
issued, as a consequence of which transit terminated upon storage,
in the T-shed and before sale and disposal of the cargo. It was
H
354 SUPREME COURT REPORTS [2007} 8 S.C.R.

A destroyed by the fire after the cover under the policy ceased. The risk
would have been covered, if you had obtained a "Storage Risk Policy".
Such a policy would have covered a loss due to fire when the goods
were stored. In the absence of such a policy, the loss which occurred
due to fire to the stored goods, well after the voyage and transit
terminated, cannot be claimed under the above. The claim, therefore,
B is not maintainable."

The plea of the appellant-Insurance company for repudiating the present .._
claim was that the goods were destroyed in general storage other than in the
ordinary course of transit and it was also observed that what was covered
C was transit risk and not storage risk. Therefore, it was held that the claim was
not maintainable. The Commission examined the relevant provisions and took
the view that as per the Institute Cargo clause and extended coverage to the
policy on payment of additional amount, the insurance cover of the goods
would be till the delivery to the consignees at the destination named therein
i.e. the insurance coverage was valid till the goods were delivered to the
D consignees' warehouse or other final warehouse or the place of storage at the
destination. Ultimately, the Commission decreed the claim of the respondent.
Hence the present appeal.

3. We have heard learned counsel for the parties and perused the
records. A policy was taken out which is known as Marine Insurance Policy
E for import of 12,000 metric tones of crystal sugar from Guangzhou, China to
Calcutta;fndia Port for which a premium ofRs.13,57,450/- was paid. It w~ also
mentioned that it was subject to the clauses attached which formed part of
the policy, inter alia, Institute Cargo Clause 'A' (21-A). As per this policy,
the ship was supposed to take the cargo from Guangzhou, China to Calcutta
p Port. It was also not in disj.JUte that the goods safely reached Calcutta Port
on 22.9.1994. The discharge of sugar commenced on 22.9.1994 and continued
up to 13.10.1994. 1,39,000 bags of sugar were transported by 274 trucks from
the port to private godowns. The transportation work started on 26.9 .1994 till
10.10.1994 and it was stored at different sheds. Thereafter on 27.9.1994 a
request was made for extension of insurance coverage and extension of
G insurance coverage was granted on 28.9.1994 which reads as under:

"At the request of the insured it is hereby declared and agreed
to extend the cover under the within mentioned policy No.01/534/94
from Calcutta Port to any place oflndian Republic. All other terms and
conditions of the policy remains unaltered."
H
vNTEO !XOIA IXSL'RA:-ICE CO LID •·.GREAT EASTER.\: SHIPP!~GCO LTD [AK. MATHL'R. l J 355

.....,.
Unfortunately, fire broke out in T-shed on 21.10.1994. Therefore, the A
respondent raised a claim for loss of sugar by fire in T-shed. Relevant
provisions of Institute Cargo Clause, which deals with duration transit clause
reads as under:

"9.1.3. On the expiry of 60 days after completion of discharge
overside of the goods hereby insured from the overseas vessel at the B
final port of discharge, whichever shall first occur.''
)..
It further says that so far as law and practice is concerned this insurance
was subject to English law and practices. As per this transit clause of the
.
~'
Institute Cargo clause, the policy covered on delivery to the consignee's or
other final warehouse, or place of storage at the destination named. therein. c
It further laid down the period, that on expiry of 60 days after completion of
discharge overside of the goods insured from the overseas vessels at the final
port of discharge, whichever shall first occur. As per the policy, the destination
I"
was Calcutta Port, India. This policy was extended by the subsequent cover
note as mentioned above and it was mentioned that the policy was extended D
to cover from Calcutta Port to any other place of destination in Indian
Republic and the tenns and conditions of the policy remained unaltered.

4. The submission of Mr.Vishnu Mehra, learned counsel for the appellant
was that since the destination was Calcutta Port and once the goods reached
Calcutta Port and the same were discharged, then the policy stood discharged E
and if the goods were kept in some other different sheds then that storage
is not covered. Learned counsel for the appellant submitted if the goods had
been taken out and had been destroyed in transit then perhaps the loss would
have been covered. So far as the present case is concerned, the goods
reached the Calcutta Port and they were discharged from the vessels and they
_,., F
were taken out and kept in storage in different sheds and there it was
destroyed because of fire, the storage in the godown is not covered as per
the original policy. According to learned counsel for the appellant the
destinatio!l in the original policy was Calcutta Port and the goods were
discharged and kept in storage at the risk of the respondent. It was submitted
that the policy which was extended was only for transit purpose and not for G
storage purpose. Therefore, the appellant rightly repudiated the claim.

)<
5. As against this, Mr. Divan. learned senior counsel for the respondent-
claimant submitted that when the coverage stood extended on same tenns and
conditions and it was clearly mentioned that it would cover to any part of the
H
356 SUPREME COURT REPORTS [2007) 8 S.C.R.

A Indian Republic, that means that the goods in storage in transit from Calcutta
Port to any part of the destination would cover the policy on same terms and
conditions along with the original marine policy. Therefore, the limited question
that arises for consideration is whether the coverage which has been extended
would cover the goods till they reached the destination in any part of the
B country or not.

6. Mr. Mehra, learned counsel for the appellant has very strenuously
urged and took us through the Marine Insurance Act, 1963 and tried to
impress upon us that as per the terms and conditions of the policy, once the
goods reached the destination i.e. Calcutta Port, the policy stood discharged
C and the extended coverage does not cover the storage but goods in transit
till they reached any part of the country.

7. We have bestowed our best of consideration to the rival submissions
of the parties. Mr. Divan, learned senior counsel for the resp~ndent submitted
that as per ·the Institute Cargo Clause, the English law and practice covers
D the dispute and in that connection, Mr. Divan invited our attention to a
decision in Bayview Motors Ltd. v. Mitsui Marine & Fire Insurance Co. Ltd.
& Ors., reported in (2003) 1 Lloyd's Law Reports 131 and in John Martin of
London, Ltd. v. Russel, reported in (1960) 1 Lloyd's List Law Reports 554. He
has also referred to The Law Lexicon, so as to give the meaning of the words,
'extension' and 'renewal' and also invited our attention to various
E interpretation of the word, 'extension' and in that connection, he has also
invited our attention to a decision of this Court in Provash Chandra Dalui
& Anr. v. Bisv.•anath Banerjee & Anr., [ 1989] Supp. l SCC 487 , and in that
connection our attention was invited at paragraph I4 which reads as under:

" 14. It is pertinent to note that the word used is 'extension' and
F not 'renewal'. To extend means to enlarge, expand, lengthen, prolong, ......
to carry out further than its original limit. Extension, according to
Black's Law Dictionary, means enlargement of the main body; addition
of something smaller than that to which it is attached; to lengthen or
prolong. Thus extension ordinarily implies the continued existence of
G something to be extended. The distinction between 'extension' and
'renewal' is chiefly that in the case ofrenewal, a new lease is required,
while in the _case of extension the same lease continues in force during
additional period by the performance of the stipulated act. In other )/ ,..
words, the word ' extension' when used in its proper and usual sense
in connection with a lease means a prolongation of the lease.
H
UNITED INDIA INSURANCE CO LID. 1·. GREAT EASTER.'li SHIPPING CO LTD [AK. MATiilll J.] 357

y
Construction of this stipulation in the lease in the above manner will A
also be consistent when the lease is taken as a whole ...."

He has also submitted that in case of interpretation of policy if two views are
possible, then the one which favours the policy-holder should be accepted
as the same serves the purpose for which the policy is taken and would be
in consonance with the object to be achieved for the lives assured. B
8. In support of his contention, learned counsel relied on a decision of
.~
this Court in Shashi Gupta (Smt.) v. Life Insurance Corporation of India &
Anr., [1995] Supp. I SCC 754 in which it has been held as follows:

"As both the aforesaid interpretations are reasonably possible, c
we would accept the one which favours the policy-holder, as the same
advances the purpose for which a policy is taken and would be in
consonance with the object to be achieved for getting lives assured."

9. Our attention was also invited to a decision of this Court in Life
Insurance Corporation of India v. Raj Kumar Rajgarhia & Anr., [1999] 3 SCC D
465 wherein it has been held as follows :

"It is not always possible to be guided by the meaning of the
words as found in the dictionary while resorting to interpret the actual
meaning of a word found in an agreement between the parties. While
construing the meaning of a particular word found in an agreemel'lt E
between the parties the intention of the parties to the document in
question wi1l have to be given necessary weightage and it is not
possible to give a wider and liberal meaning merely because one of
the parties to the said agreement is a public authority. While
..., interpreting the terms of the insurance policies if two views are
possible, courts will accept the one which favours the policy-holders."
F

I 0. Our attention was also invited to a decision of this Court in United
India Insurance Co, ltd. v. Pushpalaya Printers, [2004] 3 SCC 694 wherein
it has been held as follows :
G
" In order to interpret clause 5 of the insurance contract, it is also
necessary to gather the intention of the parties from the words used
in the policy. It is evident from the terms of the insurance policy that
)'.
the property was insured as against destruction or damage to whole
or part. If the word "impact" is interpreted narrowly, the question of
... impact by any rail would not arise as the question of a rail forcibly H
358 SUPREME COURT REPORTS [2007) 8 S.C.R.
....
A coming into contact with a building or machinery would not arise. In
the absence of specific exclusion and the word "impact" having more
meanings in the context, it cannot be confined to forcible contact·
alone when it includes the meanings "to drive close", "effective action
of one thing upon another" and "the effect of such action"; it is
reasonable and fair to hold in the context that the word "impact"
B contained in clause 5 of the insurance policy covers the case of the
respondent to say that damage caused to the building and machinery
on account of the bulldozer moving closely on the road was on
account of its "impact". Clause 5 speaks of"impact" by "any rail/road
vehicle or animal". If the appellant Company wanted to exclude any
c damage or destruction caused on account of driving of vehicle on the r
road close to the building, it could have expressly excluded the same. >
The insured possibly did not understand and expect that the
I
destruction and damage to the building and machinery is confined
only to a direct collusion by vehicles moving on the road, with the l
;
building or machinery. In the ordinary course, the question of a
D vehicle directly dashing into the building or the machinery inside the
building does not arise. Further, "impact" by road vehicle found in the
company of other words in the same clause 5 normally indicates that
damage caused to the building on account of vibration by driving
vehicle close to the road is also included."
E 11. Our attention was also invited to a decision of this Court in Oriental
Insurance Co. Ltd. v. Sony Cheriyan, [1999) 6 SCC 451 wherein it has been
held as follows :

"The insurance policy between the insurer and the insured
represents a contract between the parties. Since the insurer undertakes
F
to compensate the loss suffered by the insured on account of risks
covered by the insurance policy, the tem1s of the agreement have to
be strictly construed to determine the extent of liability of the insurer.
The insured cannot claim anything more than what is covered by the
insurance policy."
G
12. Our attention was also invited to a decision of this Court in Mis.
Peacock Plywood Pvt. Ltd. v. The Oriental Insurance Co. Ltd., JT (2007) l
SC 191 ·wherein at paragraph 71 of the judgment while interpreting the x
expression, "peril insured against", it has been held as follows :

H "Marine Insurance Act is subject to the terms of insurance policy. I
t
UNITED INDIA INSURANCE CO LID.''· GREAT EASTER.II; SHIPPING CO LID [A.K. MATHUR. I) 359

Where the insurer takes additional premium and insure a higher risk, A
no restrictive meaning thereto need be given. A term of the policy
must be given its effect. While construing a contract of insurance, the
reason for entering thereinto and the risks sough to be covered must
be considered on its own terms. "

13. A reference may also be made to a decision of this Court in Polymat B
India (P) Ltd. & Anr. v. National Insurance Co. Ltd & Ors., (2005] 9 SCC
174 wherein this Court held as follows :

"The expression "factory-cum-godown" occurring in the policy
document has to be read in the present context with the other
conditions which appear in the policy document. In fact clause 8 of C
the policies concerned specifically made a query as to whether the
goods were stored in the open or there was a kutcha shed or timber-
bu ilt or thatched-roof building within 15 m (50ft) of the property,
asking for details in this regard. But no details were given and the
query in clause 8 was answered in the negative. Therefore, what was D
sought to be insured was the plant and machinery. It is admitted that
there was no godown. Therefore, it is clear that the goods lying
outside the plant were not insured. Had the intention of the parties
been otherwise, then they would have answered the query in clause
8 in positive terms, which details. But it was answered in the negative. E
Therefore, the documents have to be construed in the manner they
are presented and a different interpretation cannot be given do hors
the context."

14. Learned counsel also referred to The Law: Lexicon, to give dictionary
meaning to the word, "extend", which reads as follows : F
.. "Extend. This term has a wide variety of meanings and has been
defined as follows : To prolong, to continue or continue in any
direction; stretch out; to stretch out of reach; to expand; to enlarge
or lengthen the bounds or dimensions or; lengthen. And it is sometimes
used as equivalent to the word "exceed" (as) to extend the bounds G
of jurisdiction."

Learned counsel also referred to K.J. Aiyar's Judicial Dictionary wherein the.
word "extend" has been defined as follows :

"EXTEND. The word "extend" in an enactment 1s not quite H
7

360 SUPREME COURT REPORTS [2007] 8 S.C.R.

A analogous to "shall come into force". Where it is laid down in an Act
that it extends to a certain area it does not necessarily mean that it
is also in that area, particularly when there is an express provision that
before it can come into force, something further, such as a notification,
is necessary."

B Learned counsel also invited our attention to Black's Dictionary of Law (Fifth
Edition) which defines the word, "extend'" as follows :

"Extend. Term lends itself to great variety of meanings, which
must in each case be gathered from context. It may mean to expand,
enlarge, prolong, lengthen, widen, carry or draw out further than the
c original limit; e.g., to extend the time for filing an answer, to extend
!! lease, term of office, charter, railroad track, etc."

15. Learned counsel also invited our attention to a decision of this
Court in General Assurance Society Ltd. v. Chandumull Jain & Anr., [1966)
D 3 S.C.R. 500. In that case it was observed 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 uberrimafides i.e., good faith on the part of
the assured ·and the contract is likely to be construed contra
E proferentem that is against the company in case of ambi~u·ity or
doubt. A contract is formed when there is an unqualified acceptance
of the proposal. Acceptance may be expressed in writing or it may
even be implied if the insurer accepts the premium and retains it. In
the case of the assured, a positive act on hi.s part by which he
recognizes or seek~ to enforce the policy amounts to an affirmation
F of it. This position was clearly recognized by the assured himself: ·
because he wrote, close upon the expiry of the time of the cover
notes, that either a policy should be issued to him before that period
had expired or the cover note extended in time. In interpreting
documents relating to a contract of insurance, the duty of the court
G is to interpret the words in which the contract is expressed by the
p~rties, because it is not for the court to make a new contract, however
reasonable, if the parties have not made it themselves. Looking at the
proposal, the letter of acceptance and the cover notes, it is clear that
a contract of insurance under the standard policy for fire and extended
to cover flood, cyclone etc. had come into being."
H
~/

L'l\ITED INDIA INSL'RANCE CO LTD 1·. GREAT EASTER," SHIPPING CO l TD [A.K MAIT!l:RJJ 361
.. 16. Our attention was invited to Queen's Bench decision in John Martin A
v of London, Ltd v. Russell, (1960) Vol. I Q.B. (Com.Cr.) 554). In this case,
purchase of 7200 cartons of pure refined lard, c.Lf., J.K.Port was made by the
plaintiff from Chicago company in May, 1957. In the same month lard was sold
by plaintiffs to various English customers on landed terms ex-quary Liverpool.
The defendant insured on June 7, 1957 covering lard against all risks and
including Institute Cargo Clauses (Extended cover) and the policy provided
B
at and from Chicago to Liverpool or held covered Institute Cargo Clauses
(Extended cover). This insurance continued until the goods were delivered to
the consignees' or other final warehouse at the destination na_med in the
policy. In terms of the aforesaid policy, lard discharged from vessel into transit
shed on quary, on July 2, 1957 and delivery orders were issued. On July 4. c.
1957 lard was found to be infested with copra beetle from another part of
transit shed. Delivery orders were cancelled and reissued later. The plaintiffs
claimed under the policy and it was denied that the cover terminated on
discharge into transit shed which was final warehouse and that insurance
ceased on discharge of goods if consignees did not intend to send goods
D
to final warehouse. The pfaintiffs' contention was that the lard was still
insured because it was in a transit shed and had not reached consignees or
other final warehouse. It was also contended that transit shed was not a
warehouse and the transit shed was owned by the port authority and that the
transit shed was not a final warehouse. In this background, when the policy
was repudiated, the claim was filed. In that context, leaned Judge held as E
follows:

" ..... that transit shed at Liverpool was the place at which goods were
placed as soon as they were discharged and they were then waiting
patently to go somewhere else; and that therefore, the transit shed
was not the final warehouse; that insurer's contention that cover F
·~
ceased if consignee did not intend to send goods to a final warehouse
did not give reasonable businesslike meaning to the clause and that
there was no condition that goods were only covered so long as they
were intended to go to a final warehouse; and that there fore, the
insurer had failed to prove that goods were not covered when G
damaged .. "

Mr. Divan, learned senior counsel strongly relied on the above observation
,,... and submitted that this decision given by the English Court is binding as per
" the terms of policy that the English law in question would be applicable.
Learned senior counsel submitted that in view of the direct decision of the H
'
~
362 SUPREME COURT REPORTS [2007) 8 S.C.R. I
~

A English Court, the repudiation of the claim by the appellant-Company is ex ~
facie bad. Learned senior counsel also invited our attention to another English y
decision in Bayview Motors Ltd v. Mitsui Marine and Fire Insurance Co.
Ltd. & Ors., (2003) Vol.I C.A.131. In this case the claimants were dealers in
motor vehicles in Providenciales, Turks and Caicos Islands. In· 1997 they
bought two consignments, each of six vehicles from Toyota Tsusho Corporation.
B The vehicles were sold c.i.f. Santo Domingo in the Dominican Republic
although the terms of the contracts of sale both referred to the destination
of the goods being the Turks and Caicos Islands. The consignment was
...
insured. The first consignment arrived in Santo Domingo on August 11, 1997
and the second consignment arrived on September 14, 1997. The vehicles
c were not released by the Dominican customs for transshipment to the Turks
and Caicos Islands. The claimant claimed under the insurance policies alleging
that the vehicles were stolen or otherwise taken without any legal justification
by employees of the Dominican customs after discharge from the ve~sels in
Santo Domingo. The defendants claim was that the cars were "confiscated"
1
by the Dominican custom authority because of contravention of Dominican
D
laH. Therefore, loss was caused by seizure and it excluded or excepted peril
I
I
under the terms of the insurance cover. It was contended that the loss was
proximately caused by the claimant's failure to take reasonable steps to avert .....i_
or minimize their loss in particular by ensuring that their rights against the r-
Dominican customs were properly preserved by seeking legal advice or
E otherwise pursuing legal proceedings. The Queen's Bench held that the
insurers' submission that the losses occurred after cover had ended and /or
by seizure, an excluded peril, would be rejected. The insurers filed an appeal
and in the appeal their Lordships held as follows:

" .... where goods were intended to go to the destination named in
F the policy and then on to some other destination cl. l(a) did not
contemplate that there would be a final ·warehouse or place of storage ,,...
at the destination named in the policy; in such a case the warehouse
f
or place of storage was not final and cover would only cease if the

G
assured elected to use it either for storage other thin in the course
of transit or for allocation or distribution; otherw.ise cover was extended
. i

for up to 60 days by cl. l(c)."

Learned counsel submitted that in view of this interpretation of the clause it
would mean that after the extended coverage granted by the Insurance
). ~--
company the goods till they reach any destination on any part of the country ·~
H would equally stand covered.
L"!\llTED INDIA l'.'ISURANCE CO. Lm .•.. GREAT EASTERN SHIPPING CO.LTD. [AK MA rnuR. J l 363

17. After considering the ratio with regard to the construction of the A
terms of the policy it transpires that while interpreting the policy the courts
should keep in view the intention of the parties as well as the words used
in the policy. If the intention of the parties subserves the expression used
therein then the expression used in that context should be given its full and
extended meaning. In the present case, as is apparent on reading of the B
Institute Cargo clause and the coverage, terms of the policy and the extended
coverage, the intention that appears from these terms and conditions that the
goods were first covered from port in China, destination in Calcutta port and
thereafter extended coverage was sought and in that it was extended to any
part of the Republic of India. If these two terms of the policy are read in
conjunction then it clearly transpires that the goods are covered till they C
reach the destination in any part of India. If the extended cover would not
be given the policy would extend to Calcutta port. If extended, coverage is
read, which clearly stipulates that this extension is covered on same terms and
conditions of the original policy then it could mean that the policy has been
covered till the goods reach the consignee in any part of the country in India. D
In fact, the extended coverage was only meant for the goods to be covered
till they reach destination either by rail or road in any part of the country. If
this extended coverage is not interpreted to mean that goods should reach
the destination in any part of India, then the extended coverage on payment
of higher premium would be meaningless. The coverage was sought because
the final destination of the goods was not at Calcutta port. When the coverage E
was extended on same terms and conditions that would mean that the goods
were covered till the same reached in any part of the country in India. In the
present case. the goods reached the Calcutta Port and they were taken to
different sheds. But unfortunately, the goods were destroyed by fire at Calcutta
port itself. Therefore, we are of the view that since the goods were covered p
from Calcutta port till the same reach its destination and they were lying on
storage, that would cover the goods by the extended policy and the insurer
cannot defeat the claim of the claimant that the goods once reached the
destination at Calcutta the policy stood discharged. The contention of Mr.
Mehra that the extended coverage does not cover the goods in transit till they
reach any part of the country is not correct because the transit infers storage G
also till it reaches its destination. The damage on the rail or road would also
... include that in transit the goods are to be kept in transit shed, the policy
would cover that also. If this interpretation is not given then the extended
coverage would be of no use. Looking to the expression used in the
background of the intention of the parties, it clearly transpires that once the H
goods were insured, then till they reach a~y part of the country shall be
364 SUPREME COURT REPORTS (2007] 8 S.C.R.

A covered by the extended coverage. Therefore, the contention of Mr. Mehra
cannot be accepted.

18. The next question comes with regard to the quantum of compensation.
In view of the fact that the reports of Mis. Apex Surveyors Pvt. Ltd as well
as N.V.P. Sharma Associates Pvt. Ltd. were considered by the Commission for
B computing the quantum of compensation and on that basis the compensation
has been granted by the Commission, that cannot be said to be in any manner
bad as both the Surveyors were of the appellant company and the appellant
company cannot possibly deny the amount of compensation arrived at by
these surveyors. The calculation given by Mis. Apex Surveyors Pvt. Ltd. has
C been accepted by the Commission and there is no reason for us to take a
different view from the Commission as the Commission has arrived at the
amount of compensation as assessed by Mis. Apex Surveyors Pvt. Ltd.
Therefore, we affirm the order passed by the Commission on this count also.
However, we may modify the order of the Commission with regard to intere~t:
The Commission has granted interest @ 9% from the date of report of the
D Surveyor but we modify the said order and direct that the claimant Will be
entitled to interest at the same rate from the date of the order of the Commission
instead of the date of report of the Surveyor.

19. As a result of our above discussion, we find that the view taken by
E the Commission appears to be justified and there is no ground to interfere
with the order of the Commission except to the extent of interest as indicated
above. Hence, this appeal fails and is dismissed. There would be no order as
to costs.

K.K.T. Appeal dismissed.