PER VINEETA RAI

1. First Appeals No. 458 of 2008 and 16 of 2009 have been filed by the Export Credit Guarantee Corporation of India Ltd. (for short ECGC) and Pentagon Screws & Fasteners Ltd. (for short the Complainant) respectively being aggrieved by the order dated 11.09.2008 of the Delhi State Consumer Disputes Redressal Commission (for short the State Commission) passed in Complaint No. C-48/2000. The latters appeal has been confined to the State Commission not directing the ECGC to pay the prevailing 18% interest on the actual amount of loss suffered by it. Since the facts and the parties are similar in respect of these First Appeals, arising out of the same consumer dispute, it is proposed to dispose them of through a single order.

2. FACTS : In its complaint before the State Commission, the Complainant had stated that it was involved in the business of export of screws and fasteners to buyers in several countries, including a single buyer company known as M/s Heads and Threads (EU) Limited in the U.K., and it had earned foreign exchange in Pound Sterling as a part of its business. To insure its business against risks, which included non-receipt of payment from any foreign buyer, Complainant had taken an insurance policy valid for the period 01.06.1995 to 31.05.1997 for a maximum liability of Rs.50 Lakhs from ECGC, which is a company under the Union Ministry of Commerce, Government of India, set up with the purpose to (i) insure and cover the perils/risks of the prospective exporters vis--vis the amount of money involved in foreign currency payable by the customers of different foreign countries against the imports made by them from India for any commodity/types exported by the manufacturers/businessmen etc.; and (ii) earn & mop up as much as possible foreign exchange business encouraging export from it. Complainant had a very good track record in its -2- i. ii. iii. business dealings and had never faced any problems either from its foreign buyers or from ECGC. However, on 31.07.1996 a shipment worth Rs.9,99,415/- was made to the aforesaid buyer in the U.K., which the said buyer failed to honour by not making the required payment in foreign currency (Pound Sterling). Complainant made several efforts to procure this payment but without success. It, therefore, filed an insurance claim with the ECGC, with which it was insured, for settling the same. ECGC, however, repudiated the claim on the following grounds: the shipment had been declared late by 2 months and also after occurrence of default; credit limit as required had not been approved on the buyer; and the default itself had been reported late by 4 to 5 months. Complainant, while admitting that there was some delay in declaring the shipment and also reporting the default, stated that these were for bonafide reasons because it was pursuing the matter with the U.K. buyer and was very hopeful of consequently receiving the payment. Further, although the shipment had been declared with a delay of 10 days (and not 2 months) but since ECGC had accepted the premium against that shipment the implication was that it had condoned the delay in filing the declaration. Complainant, therefore, filed a complaint before the State Commission praying that ECGC be directed to make the payment of the claim in question in Pound Sterling 18,115.21 (i.e. Rs.12,68,050/-) alongwith 24% interest per annum from the date of making the claim till its realization besides compensation of Rs.50,000/-.

3. On being served, ECGC stated that the claim was rightly repudiated since it was in violation of the provisions of the insurance policy, which was a contract between the two parties. It was specifically stated that as per clauses 20 and 21 and para 3.1 of the insurance policy, the Insured was required to obtain a specific credit limit against the buyer, prior to making the shipment. In the instant case, no such credit limit was taken by the Complainant before making the shipment on

31.07.1996 for Rs.9,99,415. Further, as per clause 8 of the policy, the Complainant was required to file a declaration about having made the said shipment 15.08.1996 whereas it filed this before declaration only on 25.10.1996. Complainant also delayed filing the declaration in respect of overdue payments as per Clause 8(b) of the insurance policy in respect of those payments which remained wholly or partly unpaid for more than 30 days from the due date in respect of shipments made during the insurance policy period, which are to be filed before the 15 of every month. th While admitting that ECGC did accept premium on 28.10.1996 for insuring the shipment in question, it was emphasized that mere acceptance of the premium did not amount to condoning the delay in filing the declaration of the shipment and conclusion of the insurance contract, as is very clear from the footnote in the receipt given in acceptance of the premium, which reads as follows:

N.B.: This receipt is only an acknowledgment of Cash/Cheque received. It creates no liability on the Corporation of any kind whatsoever, nor shall this receipt amount to or mean admission of any fact or circumstances or any liability under any Policy or Guarantee issued by the Corporation to any person making the payment or concerned therewith or therein.

Therefore, ECGC was fully justified in retaining the premium and repudiating the claim in terms of the insurance policy.

4. The State Commission after hearing the parties allowed the complaint by observing as follows:-

12. So far as non-declaration of the shipment is concerned, the shipment was declared through the filing of return to the E.C.G.C. i.e. the OP along with the premium and compliance of both the requirements was duly accepted and no objection of any kind was raised by the OP. Thus the approval of the credit limit on the buyer is implied and also by way of inference and evidence because the insurance premium in credit suspense of the complainant company remained intact and that of the individual shipment is also paid.

13. As regards delay of 4-5 months, this has to be considered in the light of past experience and track record of payments having been good and quite upto the mark regarding all the previous shipments and thus the complainant company had to be considerate of bearing with the defaulting company for 4 to 5 months enabling them to overcome their temporary financial crisis. In the letter dated 15-05-1997 the E.C.G.C. stated the period of delay in declaring the shipment as 2 months whereas in the earlier letter dated 07-04-1997 it was specifically declared that the shipment had been late by 10 days. From the aforesaid contradictory stand the OP was trying to find out some or other excuse.

14. Even if there was any such delay it was well explained by the complainant to the OP by way of letter dated 7 April, 1997. The very fact that the premium was th made in the first week of October, 1996 vide confirmation letter dated 04-11-1996, the delay became redundant. Even otherwise delay in reporting to E.C.G.C. about non-receipt of payment was only because of receipt of continuous assurances from the buyer and his track record.

The State Commission while allowing the complaint directed ECGC to pay the Complainant Rs.12,68,050/- towards the actual loss suffered together with Rs.50,000/- as compensation for mental agony and harassment and Rs.10,000/- as litigation costs.

5. Being aggrieved, both the parties have filed the present First Appeals and, as stated earlier, the Complainant has filed the appeal limited to payment of 18% interest on the actual amount of loss suffered by it.

6. Learned Counsel for both parties made detailed oral submissions essentially reiterating the facts that were placed before the State Commission.

7. Briefly, the learned Counsel for ECGC contended that the State Commission erred in not appreciating the fact that there were admittedly clear violations by the Complainant of the terms and conditions of the insurance policy. The State Commission erroneously allowed the complaint primarily on the grounds that ECGC had accepted the premium, despite the delay on the part of the Complainant in making the declaration regarding the shipments and that this acceptance amounted to condonation of delay, although it had been explained in the receipt itself that it was only an acknowledgment of the cash and cheque received and created no liability on ECGC of any kind. ECGC insures a very large number of exporters making thousands of shipments across the world every month and, therefore, it is not practicably possible for ECGC to monitor and keep tab of each and every exporters day-to-day business on an individual basis. Under these circumstances, the onus is on the Insured to diligently follow and abide by the terms and conditions of the policy. Violation of the terms and conditions of the policy cannot be accepted or condoned unless ECGC specifically agrees to the same in writing, which was not so in the instant case. In view of these facts, ECGC was fully justified in repudiating the claim.

8. Learned Counsel for the Complainant on the other hand while admitting that the claim was filed with a delay of 10 days stated there were bonafide reasons for this delay since it was trying to persuade the foreign buyer to make the necessary payment and, therefore, ECGC was not justified in repudiating the claim. The State Commission fully appreciating these facts had, therefore, rightly accepted the Complainants contention and had concluded that ECGC was not justified in repudiating the claim. In support, it was pointed out that once ECGC accepted the premium, it did amount to condoning the delay. Further, because of the acute shortage of foreign exchange at that time and the dire need to obtain the same through exporters like the present Complainant, even in the past such delays were overlooked and payments were accordingly adjusted in the account books and declaration charts issued. Regarding the delay in declaring the shipment, it was pointed out that this occurred because the person who was handling the ECGC matters was on long leave and, therefore, it could not be submitted in time. However, it was submitted in October 1996 and was accepted by ECGC vide its confirmation dated 04.11.1996. Keeping in view all these facts, the First Appeal filed by ECGC does not merit consideration. On the other hand, the Complainant contended that while the State Commission had rightly redressed its main grievance, it erred in not granting the prevailing 18% interest on the actual amount of loss suffered by it i.e. Rs.12,68,050/- and, therefore, requested that ECGC may be directed to pay the awarded amount of Rs.12,68,050/- along with 18% interest.

9. We have considered the submissions made by learned Counsel for both parties and have also gone through the relevant documents on record, including the insurance policy. It is not in dispute that as per the insurance policy issued by ECGC, the Insured was required to observe several terms and conditions laid down in it. Vide letter dated 09.06.1993 issued by ECGC the Complainant was specifically communicated in writing about the important provisions of the insurance policy, which required strict compliance. These provisions, inter alia, included the procedure pertaining to credit limits on buyers as also the time within which the declaration of shipments and payment of premium was required to be made. It was also pointed out in this letter that if these provisions were not complied with, ECGC would not admit claims arising from any of the commercial risks even if the premium had been paid for covering all such shipments. Admittedly there was delay on the part of the Complainant in filing the required declaration of the shipments made; taking the approval of the credit limit as required; and also reporting the default beyond the time specified for the same. Keeping this in view, there was a clear breach of the terms and conditions of the insurance policy and we find force in the contention of Counsel for ECGC that merely accepting the premium did not amount to condoning the delay, particularly since the receipt issued while accepting the premium clarified that it was only an acknowledgment of the cash and cheque received and did not create any liability on ECGC of any kind whatsoever. It is well settled by a number of judgments of the Honble Supreme Court, including in P.C. Chacko And Anr. Vs. Chairman, Life Insurance Corporation of India [III (2008) and that a CPJ 78 (NC)] Oriental Insurance Co. Ltd. Vs. Sony Cheriyan [(1996) 6 SCC 451], contract of insurance is based upon utmost good faith i.e. uberrima fides and in case there is breach of the same, the Insurance Company would be justified in not allowing the claim. Therefore, even if such delays had been overlooked in the past, this is not adequate reason for justifying the breach of the terms and conditions of the insurance policy by the Insured in the instant case.

10. In view of the above facts, we have no option but to set aside the order of the State Commission in toto and consequently also dismiss First Appeal No. 16 of 2009 filed by the Complainant. First Appeal No. 458 of 2008, therefore, stands allowed with no order as to costs. ......................J D.K. JAIN PRESIDENT ...................... VINEETA RAI MEMBER ...................... VINAY KUMAR MEMBER