JUSTICE V.K.JAIN (ORAL)

          The complainant/appellant company is an exporter and had obtained an insurance policy from the respondent Expert Credit Guarantee Corporation of India Ltd., in order to cover the risk in the exports made by it.  The complainant had been exporting goods to M/s Overseas Trading Company of USA.  The overseas buyer having defaulted in making payment to the complainant, claims for reimbursement in terms of the policy were lodged by the complainant/appellant with the respondent.  The claims were rejected vide letter dated 27.07.2009 which to the extent it is relevant reads as under:-

1. The shipments under claim were declared with delay and after risk has materialized i.e. after the payment became overdue. The first five shipments dated I4/11/2007, 01/03/2008, 11/03/2008, 05/04/2008 and 23/05/2008 were declared on 11/07/2008 that is when the payment of first shipment was already overdue for more than 3 months. Further the sixth shipment dated 02/07/2008 was also declared with delay of 2 months on 15/10/2008 whereas the last date of submitting the declaration of this shipment was 15/08/2008. Therefore the Corporation does not have any liability in respect of the shipments under claim as per clause 19(a) of the policy issued.

2. The Corporation was informed of the overdue of payments in respect of the shipments under claim with delay of more than 5 months. This amounts to non-compliance of the policy terms and' conditions stipulated under clause 8(b) of the policy issued. Reporting the overdue with delay has resulted in additional liability for the Corporation as another policyholder from Chandigarh effected two shipment to this buyer on 22/05/2008 and 16/07/2008 for Rs.21,39,238/- and 31,92,679/- which has resulted in claim. If  the overdue had been reported in time as per the policy terms and conditions this additional liability would not have resulted. Therefore, as per clause 19(b), the Corporation does not have any liability of the losses incurred in

respect of the shipments under claim.

3. Shipments dated 23/05/2007 and 02/07/2007 were effected when the first shipment was overdue for more than 2 months. Instead of reporting the overdue to the Corporation you continued to send further shipments which enhanced the liability. This is in violation the clause? (c) of the policy.

4. You have been irregular in submitting the monthly declarations of the shipments, despite our reminders to declare the shipments by not later than 15th of the subsequent month so that such material lapse do not jeopardize your interest under the policy issued. In these reminders the Corporation warned that ECGC may not be in a position to assist you in the event of any non-payment. We sent you reminder dated 13/07/2006 advising you to declare the shipments effected for the months of January, February, April, May, July, October and November in 2005 and for the months January to June, 2006. Then again a reminder was sent on 04/10/2006 advising you to submit declarations for the month of January, February, April, May, July, October and November in 2005 and for the month of August to October 2006. Another reminder dated 15.11.2006 was sent advising you to submit the declarations for the months as mentioned in reminder dated 04/10/2006. However, no declarations were submitted by you for the above months. Four more reminders dated 02.01.2007, 06/02/2007, 01/03/2007 and 07/05/2007 were sent to you advising to submit declarations for the January, February, April, May, July, October and November in 2005 and for the months of August to October, 2006. Another reminder dated 03/06/2008 was sent to you advising you to submit the declaration for the months of September to December 2007 and January to April 2008. Despite repeated reminders you did not declare the shipments by the 15 of succeeding month including the shipments under claim and hence did not comply with the policy terms and conditions as mentioned in clause 8(a) of the issued to you. Therefore the Corporation has no liability in respect of the shipments under claim as per clause 19(a) of the policy.

 5. You declared only one shipment dated 13.06.2005 worth Rs.23,43,034/- on 07/07/2005 for the month of June 2005 whereas on 07/01/2009 you declared another shipment dated 28/06/2005 worth Rs.3,67,783/-. Similarly shipment dated 30/08/2005 for Rs.23,36,808/- for the month of August ,2005 was declared on 30/09/2005 whereas on 07/01/2009 you declared another shipment worth Rs.3,93,817/- dated 26/08/2005. Such wrong declarations and suppression of facts have been observed in respect of the declarations for the month of September,2005, May 2006, July 2006, October 2006, January 2007, March 2007, April 2007 and July 2007 as additional shipments were declared or these month on 07.01.2009. Further, for the month of January,2006, March 2006, September 2006 and February 2007 as you declared 'NIL' shipments whereas you declared shipments effected during these month on 07/01/2009. Therefore declaration by you which is one of the basis of the policy issued to you is found to be incorrect and hence the policy becomes void. You may refer to the clause '1' of the terms and conditions of the policy issued. As per clause 2’ of the terms and conditions you are required to promptly disclose the facts at all times during the operation of this policy. Therefore by wrong declaration of the shipments and suppression of details of shipments effected as mentioned above you have violated above-said  two clause of the policy."

2.        Being aggrieved from the rejection of the claims the complainant approached the concerned State Commission by way of a consumer complaint.  The complaint was resisted by the respondent primarily on the grounds on which the claim had been rejected. 

3.      The State Commission having dismissed the consumer complaint the complainant/appellant is before this Commission.

4.      The terms and conditions of the policy taken by the complainant/appellant to the extent they are relevant for the purpose of this appeal read as under:-

“7 (c) Exercise his right to stop the goods in transit from being delivered and stop shipment of further consignments unless the Corporation consents In writing to his refraining from so doing if, during the course of transit of goods, it should come to the Insured's knowledge that the:-

(i) buyer's country has banned the import of goods contracted for; or

(ii) buyer's country has ordered confiscation of goods; or

(iii) there are circumstance existing in buyer's country that may lead to any loss; or

(iv) the buyer has become insolvent or facing grave financial problem; or

(v) the buyer has refused to honour his commitment under the contract;

8. The Insured shall deliver to the Corporation on or before the day of each calendar month-

(a) a declaration of shipments in the prescribed form giving Information on all the shipments made by him during the previous month. If no shipment has been made during a month 'NIL' declaration shall nevertheless be submitted;

(b) a declaration of overdue payments in the prescribed  form giving information on all such shipments as were insured/ under this policy and in respect of which the payment due from the buyer remained wholly or partly unpaid after having become overdue for not less than thirty days as at the close of the preceding month and shall continue to deliver such declarations of overdue payments so long as any such payment remained outstanding;

19.       Notwithstanding anything to the contrary stated elsewhere in this policy, unless otherwise agreed to by the Corporation in writing, the Corporation shall cease to have any liability in respect of the gross invoice value of any shipment or part thereof-

(a) If the Insured has failed or neglected to duly declare in time in strict compliance with the requirements under condition 8(a) of the policy any one or more of the shipments that were required to be declared under the said condition and/or to pay the full premium that was due thereon; or

(b) in respect of which the Insured has failed to the relevant declarations of overdue payments as required to strict compliance with the requirements under condition 8(b) the policy;

(c) In cases where payment terms are cash against documents, documentary sight draft or documents against payment, the Insured or anyone acting for or on behalf of the Insured has released or has caused the release of the documents and/or of the goods to the buyer on any other terms of payment than on payment for onward transmission to the Insured of the full amount that was due thereon; or

(d) If the Insured has failed or neglected to duly lodge a claim with the Corporation in the prescribed form within two years from the respective due date of payment.

28. The due performance and observance of each term and condition contained herein or in the Proposal or Declaration shall be a condition precedent to any liability of the Corporation hereunder and to the enforcement thereof by the Insured.

Buyer

29. No failure by the Insured to comply with the terms and  conditions shall be deemed to have been waived, excused or accepted by the Corporation unless the same is expressly waived excused or accepted by the Corporation in writing  and such waiver, excuse or acceptance shall be subject to such terms and conditions as the Corporation may stipulate including a reduction in the percentage specified under clause 13  of this Policy, being the percentage of loss payable by the Corporation.”

5.      The following chart incorporated in the impugned order would show the defaults committed by the complainant/appellant in intimating the shipments in terms of clause 8(a) of the policy and making declarations in terms of clause 8(b) of the said policy:-

6.      It would thus be seen that there were persistent defaults on the part of the complainant/appellant not only in intimating the shipment of the consignments but also in intimating the overdue payments to the respondent.  The first consignment was shipped on 14.11.2007.  The declaration of the shipment was due on 15.12.2008 but was made only on 13.07.2008.  Similarly, the shipments at Sl. No. 2 to 6 were made on 11.03.2008, 01.03.2008, 05.04.2008, 23.05.2008 and 02.07.2008 but were declared to the Corporation only on 13.07.2008 in respect of five shipments and on 15.10.2008 in respect of sixth shipment. 

7.      In terms of clause 8 of the policy, the overdue payments i.e. the payments which had remained wholly or partly unpaid for 30 days or more were to be declared by the end of the succeeding month.  The shipments which became overdue in March, 2008 should have been reported by April, 2008.  Similarly, the shipment which became overdue in April, 2008 should have been reported by May, 2008.  Likewise, the shipment payment of which became overdue in May, 2008 should have been reported by June, 2008.  It is not in dispute that overdue payments were not declared to the respondent by the end of the month next to the month in which they had become overdue.  Thus, there was a clear breach of clause 8(a) and (b) of the policy.

8.      In view of the clause 19 of the policy the respondent Corporation is absolved of any liability in respect of the aforesaid shipments, the complainant having failed to declare the shipments and overdue payments in terms of clause 8(a) and 8(b) respectively of the policy.  It may also be noted here that in terms of clause 28 of the policy taken by the complainant/appellant, due performance and observance of each term of the policy was a condition precedent to any liability of the respondent under the policy.  Therefore, the adherence to the requirements of clause 8(a) and (b) of the policy being mandatory the complainant was not entitled to any reimbursement from the respondent for the loss alleged to have been suffered by it on account of the default committed by the overseas buyer. 

9.      It is submitted by the Ld. counsel for the complainant/appellant that the respondent had condoned the delay in payment of the premiums for the consignments in question and had thereby waived the default committed by the complainant/appellant.  I, however, find no merit in the contention.  Clause 29 of the policy extracted hereinabove clearly shows that the breach of the terms and conditions of the policy on the part of the insured shall not be deemed to have been waived by the Corporation unless such a waiver is done expressly and in writing.  In the present case the receipts issued to the complainant/appellant clearly show that no such waiver was granted by the respondent.

10.    The policy which the complainant/appellant had taken from the respondent came up for consideration of the Hon’ble Supreme Court in M/s BHS Industries Vs.ECGC reported as (2015) 9 SCC 414. and the following view was taken by the Hon’ble Apex Court:-

“35.1. Clauses 8(a) and 19(a) deal with declarations and the exclusion of liability respectively. They are absolutely specific. Clause 2 deals with disclosure of facts. Clause 10 deals with incidence of premium and payment  of additional premium and Clause 30 with uncovered risks. Clauses 8(a) and 19(a), which we have reproduced hereinabove are absolutely clear as crystal and as per the stipulations therein the insured has been cast an obligation under the policy. He is obliged under the policy to deliver to the Corporation a declaration on or before the 15th day of each calendar month in a prescribed format details of all shipments made during the previous month and even he is required to give a "NIL" declaration if no shipment has been made. Clause 19(a) refers to the declaration in terms of Clause 8(a). It also uses the words "without any omission". It adds a further postulate relating to  payment of the premium in terms of Clause 10. The prescription of twin requirements in Clause 19(a) is cumulative. They cannot be read in  segregation. The insured has to declare the shipments in terms of Clause 8(a) without omission and also pay the premium in terms of Clause 10. Premium of payment alone does not make the Corporation liable to indemnify the loss  or fasten the liability on it. It is also required on the part of the insured for the purpose of sustaining the claim to show that there has been compliance as  regards the declaration. To construe Clause 8(a) that the insured has a choice  to declare which shipment he would cover and which ones he would leave, would run counter to the mandate of the policy. It has to be borne in mind  that these are specific clauses relating to the obligations of the insured. The  attempt on the part of the appellant to inject the concept of payment of premium and the risk covered to this realm would not be acceptable.

35.2. The general clauses basically convey which risks are covered and which risks are not covered and how the premium is to be computed and paid. What eventually matters is where the liability of the insurer is  exclusively excluded, the said clauses of the policy are absolutely clear unequivocal and unambiguous. The insured after availing a policy in commercial transactions is to understand the policy in entirety.”

11.    In view of the authoritative pronouncement of the Hon’ble Supreme Court it can hardly be disputed that the terms of the clause 8 of the insurance policy being mandatory the Corporation is absolved of all its obligations under the policy in view of the clause 19 of the said policy.  The view taken by the Hon’ble Supreme court in respect of clause 8(a) would apply with a greater force in respect of clause 8(b) of the policy.

 Since the intimation of overdue payment, in my opinion, is even more important than the intimation of the shipment of the goods.  Had the complainant/appellant intimated the default on the part of the overseas buyer to the respondent within the time-frame stipulated in the policy, not only could the Corporation have advised the complainant/appellant to exercise its rights in terms of clause 7(c) of the policy it could also have brought the said default to the notice of other exporters who had taken similar covers from the respondent Corporation so that the other exporters did not export any goods to such a defaulter.  By not giving intimation of the overdue payment to the Corporation within the time stipulated in clause 8(b) of the policy the complainant denied the aforesaid opportunity to the Corporation.

12.    For the reasons stated hereinabove, I find no ground to interfere with the view taken by the State Commission.  The appeal being devoid of any merit is hereby dismissed with no orders as to costs.