11. The next step would be to understand the contents of the Policy. The Insured, who is the Complainant, is an organisation, working on behalf of certain Member airlines and accredits certain agents for broadly the purpose of sale of tickets to customers. The interface among the three parties, namely, the airline, agents and IATA is done through an electronic platform called Billing and Settlement Plan (hereinafter referred to as the ‘BSP’). The agents, so accredited by IATA, are permitted to use this platform through a BSP link and are expected to carry out all its transactions, that is sale or refund of tickets only through this BSP. The concept of BSP has been covered in detail by the Surveyor and it basically involves the agents on one side and the airlines on the other. The platform maintained by IATA includes the sale, refunds and related items, but does not include the bonuses that are paid by the airlines directly to the agents. The BSP is one huge database and processing centre, capturing the refunds information. BSP has been defined under Resolution 866 of the Travel Agent Handbook as under:

"BILLING AND SETTLEMENT PLAN (sometimes referred to as BSP) means the method of providing and issuing Standard Traffic Documents and other accountable forms of accounting for the issuance of these documents between BSP Airlines on the one hand and Accredited Agents on the other, as described in the Passenger Sales Agency Rules and in Resolution 850-Billing and Settlement Plans, and its Attachments."

12. In so far as the Insurance Policy is concerned, it is a special contract between IATA and the Insurance Company called the ‘Special Contingency Insurance Policy’. It is only a six page document. The Policy in the lead case numbered 120900/46/12/39/00000191 was for the period from 01.01.2013 till 30.06.2013. The key provisions and conditions, which are also common in all the Policies in the five complaint cases, are reproduced below:

1. Coverage: To Indemnify the Policy Holder in respect of their Net Ascertained Financial Loss (as defined) sustained or incurred during the period of this Insurance arising solely from the event of Default by Agent/s named in the list attached to this Schedule and subsequent Termination and / or subsequent endorsement hereto, in making payments in accordance with the terms of the Passenger Sales Agency Agreement.
2. Policy

The INSURER agrees subject to the terms and conditions contained herein or endorsed hereon to pay to IATA the Net Ascertained Financial Loss (as defined) sustained or incurred during the Period of insurance arising solely from Default in payments by any IATA Accredited Agent (hereinafter referred to as Agent). The Insurer shall pay the declared Net Ascertained Financial Loss to IATA within 60 days of submission of full particulars of the claim. Documentation for claim will consist of the following and shall be forwarded in duplicate to the Insurer:

a. Claim form duly completed and signed.

b. Statement showing Defaulted Agent's sales during 35 days immediately preceding the date of Default.

c.  Irregularity/ Demand for payment letter       

d. Default letter

e. Termination Letter

f. Summary of outstanding of agent and copies of correspondence exchanged with the agent along with their reply, if any, duly certified. In the event of claim settlement by the Insurer being delayed beyond 30 days after submission thereof with full particulars as stated herein then the same shall be payable with interest from the 61^st day after submission until the date of receipt of claim payment by the Insured. Rate of interest on overdue claims shall be as stipulated under guidelines published by the Insurance Regulatory and Development Authority of India (IRDA). However, no overdue interest shall be payable in respect of Net Ascertained Financial Loss amount of a non-BSP participating IATA member.

Provided the liability of the INSURER shall not exceed the Sum Insured stated in the Schedule in respect of all claims which may arise during the Period of Insurance.

3. Default by Agent:

(i)  A petition has been presented to the Court for the compulsory winding up of the Agent which has not been withdrawn within 28 days; or

(ii) The Agent convenes a meeting of its Creditors informally or otherwise for the purpose of considering an arrangement with such Creditors; or

(iii) A Receiver is appointed over any of the property or assets of the Agent; or

(iv) The Agent stops payment of its debts, or is unable to pay its debts, or is unable to carry on its business as a result of being unable to pay its debts as they fall due; or

(v) Any and all conditions as per IATA Resolutions on Passenger Sales Agency Rules, and/or Reporting and Remittance Procedures, and/or Passenger Sales Agency Agreement applicable to IATA BSP and the Agent/s named on the list annexed to attached Schedule.

4. Net Ascertained Financial Loss: Loss of monies in respect of all accountable air ticket transactions as defined under the Passenger Sales Agency Rules due or overdue by the Agent at the time the Agent was declared Terminated in accordance with IATA's Sales Agency Rules and/or Reporting and Remittance Procedures including non-submission of instrument of payment applicable to the IATA BSP office as named on the attached Schedule and these monies not having been settled with IATA's BSP or a non-participating IATA Member.
5. Other Definitions: By reference, "Definitions" listed in applicable IATA Resolutions are included in this policy, provided that the definition in this policy will prevail in the event of conflict between the latter and the IATA definitions.
6. Conditions:

(iv)  The Insurer shall be entitled to take over and conduct in the name of the INSURED but at the Insurer's own expense, the defence of any claim or to prosecute for its own benefit, any claim for indemnity or damages provided that any such action is in accordance with the terms agreed by the INSURED. The Insurer shall have full subrogation rights under this Policy to make recoveries from any non-paying Terminated Agent within 30 days of payment of the claim submitted by the INSURED.

vi)  Maintenance of Records: The INSURED shall maintain adequate records in connection with the subject matter insured and such records will be made available to the Insurer upon reasonable notice to the INSURED, provided that breach of this clause by IATA shall not entitle the Insurer to refuse payment of a claim under this insurance policy.

(vii) Notwithstanding any other provision of this Policy, Cover note and the Schedule, the Insurer agrees to indemnify, defend and protect the INSURED and its Members and all participating airlines in the IATA BSP as stated on the attached Schedule for any damages, loss (including reasonable legal fees) that they may suffer under this policy. Notwithstanding anything contained in this clause, the total liability of the insurer, including any liability towards indemnification under this clause, shall be restricted to the maximum of the sum insured (indemnity limit) indicated in the list annexed to the policy schedule in respect of the particular Agent against whose Default a claim has been lodged by the INSURED.

13. The names of the Agents are given in the Attachment to the main Policy. Each Complaint is specific to one defaulting agent whose name appears in the Attachment to the concerned policies. The Complainant made its claim to the Insurance Company on 06.05.2013 in the lead case in accordance with the provisions of the Insurance Policy in force after default by the Agent and its termination as per procedure. Thereafter, the Insurance Company appointed a Surveyor, who gave his report on 12.02.2014. It would be worthwhile to reproduce the findings of the Surveyor in the lead case as under:

"We have presented all the facts to the underwriters for necessary decision at their end. We have submitted our independent report without prejudice. The underwriters may deal with the claim in the manner they deem fit.

1. Gross loss of Rs. 124.31 Crores claimed by IATA is only on paper and is not established. It is not a real loss.

2. The claim is notional loss since vital information regarding refunds and cancellations to reconcile with tickets issued has not been provided by IATA. Therefore, quantification or certification of loss is not possible.

3. Commercial relation is maintained between the parties (involved airlines & the defaulting agent), hence, nonpayment cannot be construed as default contemplated under the policy.

4. The agent STPL has disputed the dues to IATA and the airlines, giving details of its claim with break up. IATA has declined to provide details for reconciliation. Essentially therefore the whole issue is of dispute regarding the inter se dues.

In our considered opinion, as per our observations in para 33 of the report, insurer's liability is not engaged."

The Surveyor also highlighted the reasons why the claim is not payable as under:

1.  It is a case of dispute over payments by STPL to the Complainant/Airlines which is not covered in the Policy.

2. The STPL still operating as usual by selling and refunding tickets.

3. The IATA did not:

(a) Take any punitive action against STPL.

(b) Warn/Inform other agents or other travel organizations about the default.

(c) Act as prudent uninsured.

(d) Provide details for arriving at figure of actual loss

4. The loss claimed by the complainant is only on paper and is not established as a real loss.

5. The Insurer’s subrogation rights have not been protected.

6. The Complainant has violated the evaluation criteria for an agent as per Resolution 800 (Section 4.1.C) of Travel Agent Handbook which spells that net current assets must exceed the amount of risk which in this case is Rs. 63.91 crores whereas after adjusting current liabilities the net current asset is very low i.e. Rs. 7.65 Crores which is the violation of Warranty under the policy which states the following:

“1. The Insured has truthfully declared all material facts likely to influence a prudent insurer in determining:

a) Whether or not to accept the risks:

b) The premium

ii) The Insured has not withheld from the Insurer any matter, fact or circumstance which is likely to give rise to a loss hereunder."

That after termination of the Agency by IATA, STPL cannot transact their business but till date the Respondent no. 3 has been running their business under the same symbol and name, though outside the BSP, in breach of terms and conditions of passenger sales agreement between the complainant and the respondent no. 3."

14. The Surveyor has made the loss assessment as under:

34.       Loss Assessment

As per details provided by STPL, claim by IATA should not exceed Rs. 67.44 Crores (as calculated in Para 23). However, the sum insured under the policy is available worth Rs. 63.91 Croers. As such the claim amount is restricted to Rs. 63.91 Crores.

Net Ascertained Financial Loss has not been provided or confirmed by IATA.

Gross loss claimed is Rs. 124.31 Crores.

15. Based on the Surveyor’s Report, the Insurance Company repudiated the claim as under:

"We refer to the above claim lodged by you for amount purportedly due to ticketing agent M/s Spring Travels P. Ltd., under the IATA Billing & Settlement Plan.

We note that the claim is made for amount of Rs. 124.31 crores declared to be in default towards ticket sales on behalf of Member airlines during March 2013, following which the agency was terminated on 01/05/2013.

Immediately on intimation of the claim we had appointed Mr. Ram Gopal Verma, duly licensed independent Surveyor for statutory survey, verification and assessment of the loss.

The Surveyor had engaged in extensive exercise of gathering information, inter alia, regarding amount claimed, the detail of ticket sold, cancellation / refunds against the same, amount due by the airlines as being claimed by the agent etc., to reconcile and arrive at the actual loss. A detailed survey report has been submitted by the Surveyor.

We have carefully considered all available documents, material, information as well as Report of the Surveyor and on a detailed examination of the same, we find that loss has not been established much less to the extent claimed and no liability for the claim is established under the policy.

Even at the outset we are obliged to point out that the policy is a contract of indemnity and can only be construed as providing coverage in respect of loss actually suffered and established it also needs to be highlighted that IATA is essentially claiming losses on behalf of Airlines for their tickets sold by the agent, through IATA's BSP platform facilitating sale of tickets.

In as much as the claim relates to alleged non payment in respect of tickets sold, necessarily certain aspect need reconciliation to determine the loss to the airlines that may be claimed by IATA.

Survey has revealed that,

1. ) Indisputably there has been several cancellation on a routine basis by various customers who had booked the tickets through them and in respect of which the agent had refunded payments. It is pertinent that the booking itself is made for a substantial period in advance and hence open to cancellations until the date of journey
2. ) The agent has intentionally withheld payments and advised that there were amounts payable by the airlines to them in respect of earlier transactions.
3. ) The agent continues to sell tickets for the airlines, albeit outside BSP platform, revealing that there is a continuing commercial relationship between them.

The request for details of cancellation did not elicited proper response and instead objection appears to have been raised to the enquiry itself. Even upto September 2013, as per information provided by the agent, at least Rs.56.87 crores is liable to be adjusted. However, the Surveyor has reported that IATA has advised Jet Airways not to part with any information regarding refunds to them. The confirmed figure of cancellations and the ultimate net loss has not been properly established.

It would be a gross misconception to treat the policy as an assurance to pay whatever is claimed on the date of termination (01/05/2014) without reconciliation of cancellation or other amounts accountable to the credit of agent, so as to determine the actual financial loss. Hence the information required by the surveyor was material and essential to determine the amount payable under the policy.

The loss claimed by IATA can not be construed as actually suffered but is only a notional loss. The actual loss not been established in the absence of confirmed data regarding cancellations and amounts due to the agent, from the airlines which you have not provided.

It is also necessary to point out that there has been no action whatsoever against the agent of any significance either civil or criminal by IATA or the Airlines, despite claim of default to such huge extent. On the other hand, the agent continues to sell tickets for the airlines who appear to find no necessity to avoid or dispense with its service. The agent itself has not wound up its business but is operating commercially as it before, In the absence of any legal action and in the above circumstances, it is not acceptable that the agent has committed any willful default in order to make out claim for payment under the policy.

The right of subrogation of the insurer stands seriously prejudice in the above circumstances.

It is also necessary to point out that there have been serious lapses in financial evaluation of the agent as contemplated by agency accreditation process and adequate due diligence has not been exercised.

That IATA holds a policy of insurance cannot solely justify a claim on the basis of termination of agency or declaration of due on that date. In the above circumstances, we regret to inform that the claim is not admissible and hereby stands declined.

We reserve our right to supplement the above with further information and details, if necessary."

16. The question to be decided is whether the repudiation based on information and documents supplied by the Insured and on the Report of the Surveyor is correct and legally sustainable. The objections / grounds raised by the Insurer in the repudiation letter are broadly as under:

1. Loss not established and therefore, no loss for the claim is established. Non-supply of documents to enable the Surveyor to arrive at the “Net Ascertained Financial Loss”. This includes cancellation of tickets and refunds, which have not been taken into account. Further, the Agent has withheld payments and advised that there were amounts payable by the airlines to them in respect of the earlier transactions and the agent continues to sale tickets for the airlines albeit outside BSP platform revealing that there were a continuing commercial relationship between them.
2. Details of cancellation even when asked for did not elicit proper response and as per information provided by the Agent, atleast Rs. 56.87 Crores is liable to be adjusted further. Further. The Surveyor had reported that IATA has advised Jet Airways not to part any information regarding refunds to them.
3. The loss claimed by IATA cannot be construed as actual loss but is a notional loss.
4. No action taken by IATA or the airlines against the Agent.
5. The right of subrogation stands prejudiced.
6. Lapses in financial evaluation of the Agent and due diligence not exercised for accredition purpose.

More or less, the same grounds had been taken in the repudiation of claims in other Complaints, though in a much more summary form.

17. It would, therefore, be necessary to examine these six alleged broad objections / grounds of the Insurer as well as the shortcomings in making the claim, if any.
18. On the first issue of whether a loss (NAFL) has been established, it would be worthwhile to understand NAFL. The Net Ascertained Financial Loss (NAFL) has already been defined under the Policy and has been given in the preceding paragraph ‘12’ of this Order. The definition of NAFL contains the word ‘accountable air ticket transaction’ and the same is defined in the Travel Agent’s Handbook under Resolution 866 as under:

• “ACCOUNTABLE TRANSACTION means any transaction in respect of which a Standard Traffic Document is issued, and/or Agency Credit/Debit Memorandum received, by the Agent during the period covered by an Agency Reporting Period.”

• “STANDARD TRAFFIC DOCUMENTS means the following BSP documents:

• Electronic Miscellaneous Documents (EMD)
• Electronic tickets
• Automated coupon-by-coupon MCO (paperless or plain paper) VMCO in accordance with Resolution 725d
• Virtual Multipurpose Miscellaneous Document (VMPD)”

• “REPORTING PERIOD means the time span established by the Conference for reporting of Agent sales.”

• “AGENCY SALES DATA means that data which is collated from ticket issuance by Agents and submitted by the Ticketing System Providers to the BSP on a daily basis.”

BSP means the method of providing and issuing Standard Traffic Documents and other accountable forms and of accounting for the issuance of these documents between BSP Airlines on the one hand and Accredited Agents on the other, as described in the Passenger Sales Agency Rules and in Resolution 850—Billing and Settlement Plans, and its Attachments.”

Agency Credit and Debit Memos (“ACM” and “ADM”) are defined under “Accountable Transaction” under Resolution 866 as:

“…means any transaction in respect of which a Standard Traffic Document is issued, and/or Agency Credit/Debit Memorandum received, by the Agent during the period covered by an Agency Reporting Period.”

19. The question is whether NAFL has been established? It is a fact that the Notice of Irregularity and Notice of Default was issued by IATA based on IATA’s Travel Agent’s Handbook, which contains numerous Resolutions including a frequency of remittance as provided in the Resolution 818g. Under clause 1.6.2. of this Resolution, Agents are liable to make payments to IATA for sale of domestic air tickets sold between 1^st and 15^th of the month by 25^th of that month. Likewise for international air tickets sold between 1^st and 15^th of the month, the payment has to be made by 30^th / 31^st of the month. Similarly for the domestic air tickets sold between 16^th and 30^th of the month, the payment is required to be deposited by 10^th of the following month and for international air tickets sold between this period, the payment was to be made by 15^th of the month. In the event of irregularity and defaults in payment in such terms, IATA is empowered by the Handbook Rules to issue Notices of Irregularity and Default in accordance with clause 1.7.2. Additionally, Clauses 1.9 and 1.10 under the same Resolution deal with notification of irregularity and default action. The first Notice of Default against the Agent STPL did mention an amount of only Rs. 46,43,37,605/- for the period from 1^st to 15^th March, 2013, but in view of the continuing default including for the second fortnight of the month of March, 2013, the total default for the month was compiled amounting to Rs. 124,31,69,623/- by the letter dated 22.04.2013. The termination was done on 01.05.2013. It is to be noted that the Agent did not make any payment even after issue of Notices and also did not make any representation. This has been duly noted by the Surveyor which in his report has stated that the Agent STPL had sold tickets worth Rs. 74.45 Crores between 1-15 March and Rs. 49.86 Crores between 15-25 March and these amounts were not remitted to the Airlines. Opportunity was granted to the Agent in terms of clause 2.2.1 of Resolution 818g. The Agent has not shared any account of documentation to the effect whether any direct payment was made by the airline or any refunds due to it. The Billing & Settlement Plan summary included all adjusted refunds, Agency Credit Memos (ACM) and Agency Debit Memos (ADM).

This shows that the argument of the learned Senior Counsel that the Notices of Irregularity and Default were limited to only an amount of Rs. 46,43,37,605/- and therefore, any claim, if at all, should be limited only to this amount does not hold good because by the final letter dated 22.04.2013 of IATA, the summary of Default by the Agent was provided and this amount was to the tune of Rs. 124,31,69,623.

20. The related issue is whether the default had triggered. In this connection, it would be important to understand the definition of Default given in the policy. The definition of Default has been covered in paragraph ‘12’ of this Order. The crucial sub-para is sub-clause (iv), which is reproduced once again for convenience:

(iv)     The Agent stops payment of its debts, or is unable to pay its debts, or is unable to carry on its business as a result of being unable to pay its debts as they fall due…”

          It is very clear that the Default will arise the moment the agent stops payment of its dues for the tickets issued on the BSP platform beyond the period provided to it for doing such payment for the fortnight of the month in concern. In this regard, the learned Senior Counsel, in his argument, has submitted that all the clauses under the definition of ‘Default by Agent’ have to be read together and default only happens when there is a stoppage of business. Further, the Complainant has itself, in its evidence, mentioned that the Agent had wilfully defaulted in making payment and that there was criminal conspiracy and fraud played by the Agent, therefore, there is no liability on the part of the Opposite Party. In this regard, a careful reading of the Sub-clauses of the definition of the Default by Agent, as already given in paragraph ‘12’of this Order, makes it very clear that the sub-clauses should not be read together, as each sub-clause is disjunctive having “or” in the end, clearly indicates that the clause-(iv) can be read independent of the other sub-clauses and, therefore, if the agent stops payment, automatically default arises.  Even clause (iv) has disjunctive. So, the key part of clause (iv) to make note of is the Agent stopping payment of its debts.  In this regard, reliance is placed on the Order of the Hon’ble Supreme Court in Comm., Customs, Central Excise, and Service Tax. v. Shapoorji Pallonji and Company Pvt. Ltd., (2024) 3 SCC 358, wherein it has been observed as under:

31.       Having noticed some of the precedents in the field of interpretation of statutes, we now move on to a little bit of English grammar. The word “or” as well as the word “and” is a conjunction; and it is well known that a conjunction is used to join words, phrases, or clauses. On how the conjunctions “or” and “and” are to be read, guidance could be drawn from authoritative texts and judicial decisions. As per Justice GP Singh’s Principles of Statutory Interpretation, the word “or” is normally disjunctive while the word “and” is normally conjunctive. In English law, the position is clear as crystal, as explained by Lord Scrutton in Green vs. Premier Glynrhonwy Slate Co., that one does not read “or” as “and” in a statute unless one is obliged, because “or” does not generally mean “and” and “and” does not generally mean “or”.

32.       When the meaning of the provision in question is clear and unambiguous by the usage of “or” in clause 2(s), there remains no force in the submission of Ms. Bagchi that “or” should be interpreted as “and”. In our opinion, the word “or” employed in clause 2(s) manifests the legislative intent of prescribing an alternative. Going by the golden rule of interpretation that words should be read in their ordinary, natural, and grammatical meaning, the word “or” in clause 2(s) clearly appears to us to have been used to reflect the ordinary and normal sense, that is to denote an alternative, giving a choice; and, we cannot assign it a different meaning unless it leads to vagueness or makes clause 2(s) absolutely unworkable.”

The issue of wilful default is also inbuilt in this sub-clause when the Agent stops payment of its debt. Recourse is taken on the definition of the word ‘default’ as given in Black’s Law Dictionary, which reads as under:

“an omission of that which ought to be done” and “specifically, the omission or failure to perform a legal or contractual duty.” It is pertinent to note that the definition also includes “the idea of dishonesty, and of wrongful act”

21. Clause 1.10.2 (iv) of Resolution 818g of the Handbook provides that in the event of default, “BSP airlines will have a maximum of 30 days to submit ADMs/ACMs to be included in the final accounting with the Agent declared in default”. In such a situation, it becomes clear that such adjustments are made prior to the final accounts’ summary which is shared with the defaulting agent for payment as well as with the Insurer while invoking claim. Therefore, the figure of Rs. 124,31,69,623/- does not represent a notional loss, but has been adjusted against any outstanding amount due to / from the airlines and is actually the NAFL after adjusting ACMs/ADMs. Since STPL failed to clear the outstanding amount due from it to IATA Members Airlines as put forth in the notices of Irregularity and Default, STPL was issued a termination letter on 01.05.2013. Further, it is to be noted that during the duration between issuance of notice of default and till termination, an agent can still settle the dues payable to the participating airlines through the BSP. But this was not done.

It is only upon termination that the STPL ceases to have access to the BSP. In case of any refund, cancellation of tickets, the customers would have to approach the airlines directly once the Agent is terminated. However, refund to the Agent would not arise as the Agent in the first instance has not remitted the said amount on the BSP platform. So on the date of termination, the BSP would contain the final amount outstanding.

22. It would also be worthwhile to consider the report of the Surveyor with reference to assessment of loss. The focus of the Surveyor has been mainly on the issue of refunds by STPL for the tickets it had sold between the period covered under the ‘Default’. The Surveyor notes that STPL has been refunding tickets sold till February, 2013, but the Airlines / IATA through BSP route are not refunding the amount to STPL despite STPL having paid for all tickets that were sold upto February, 2013. After termination of agency agreement, refund processing of BSP system is no more available to STPL. The Surveyor further notes that Airlines / IATA are demanding money collected by way of selling tickets in March 2013 worth Rs. 124.31 Crores, whereas STPL has been making refunds for tickets sold in March 2013 for which STPL has not paid the Airlines as well as those sold before March, 2013 for which STPL has already paid the airlines. Hence, the final amount owed by STPL to IATA is drastically reduced because of refunds. If the statement made by the Surveyor is carefully noted, it is clear that in so far as refunds for month of March, 2013 are concerned, the question does not arise as STPL has not deposited any amount with the Airlines through the BSP system. Making such argument in a casual manner reduces the force of the Surveyor’s report, which in the instant case becomes a basis of repudiation by the Insurance Company. In so far as the refunds prior to March, 2013 are concerned, no figure of such refunds that have been made by STPL are given and supported by any document produced by the Agent which has been relied upon in such determination in the Surveyor’s report. In all likelihood, the refunds which the Airlines will make on account of cancellation will have to be routed through the BSP till the termination of the Agent. In so far as the determination of loss and indemnification is concerned, it has to be only for the period upto the termination as per the Policy. Any refund made thereafter either by the Airlines or the STPL is not relevant after termination. Thus, the basic argument of the Surveyor for not being able to assess the loss on account of refunds fails.
23. The learned Senior Counsel for the Opposite Party argued that the burden of proving loss is on the Insured and that the indemnification is only to the extent of loss suffered. He cited certain Orders of the Hon’ble Supreme Court in this regard:

(a)     The first Order cited was United India Insurance Co. Ltd. vs. Kantika Colour Lab and Others, (2010) 6 SCC 449, wherein it was held that only the happening of the event does not of itself entitle the assured to payment of the sum stipulated in the Policy, but the event must in fact result in a pecuniary loss to the assured, who then becomes entitled to be indemnified subject to limitation of his contracts. It was also held that the assured cannot recover more than the sum insured and cannot recover more than what he establishes to be the actual amount of his loss. It is only upon proof of the actual loss that the assured can claim reimbursement of the loss to the extent it is established not exceeding the amount stipulated in the contract of insurance, which signifies the out limit of the Insurance Company liability.

(b)     In National Insurance Co. Ltd. vs. Harsolia Motors & Ors., 2023 SCC OnLine SC 409, the Hon’ble Supreme Court observed that ordinarily the nature of the Insurance Contract is always to indemnify the loss. In this Judgment, the Hon’ble Supreme Court quoted its Order in United India Insurance Co. Ltd. vs. Levis Strauss (India) Private Limited, (2022) 6 SCC 1, wherein it was held that a contract of insurance is and always continues to be one for indemnity of the defined loss, no more no less.  Further, the Hon’ble Supreme Court in Bajaj Allianz Insurance Co. Ltd. & Anr. vs. State of Madhya Pradesh, (2020) 18 SCC 376, held as under:

42.       For the respondent to prove its case, a mere assertion that the loss incurred during the course of transit is not sufficient. The burden of proof lies on the respondent to show that the loss incurred was covered within the terms of the policy and that on a balance of probabilities there existed a proximate cause between the loss incurred and the helicopter being in transit. The respondent has adduced no evidence to supports its case.

(c)     The learned Senior Counsel also quoted the Order of Hon’ble Supreme Court in Export Credit Guarantee Corpn. India vs. M/s. Garg Sons International, (2014) 1 SCC 686, wherein it was held as under:

11.       The insured cannot claim anything more than what is covered by the insurance policy. “The terms of the contract have to 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 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 b that a clause in a commercial contract is bilateral and has mutually been agreed upon.

       This case law was put forth by the learned Senior Counsel in response to the arguments of the learned Counsel for the Complainant for applying the rule of contra-proferentem.

24. The question before me is whether these case laws support the arguments of the Opposite Party. The Hon’ble Supreme Court Orders in United India Insurance Co. Ltd. vs. Kantika Colour Lab and Others (supra) and National Insurance Co. Ltd. vs. Harsolia Motors & Ors. (supra) make it clear that indemnification by the Insurance Company is only limited to the loss actually suffered. There cannot be any dispute to these judgments and are relevant to the extent that indemnification is limited to the loss suffered. The Policy determines how a loss has to be determined and for this purpose, the required documents are to be supplied. The third judgment in Export Credit Guarantee Corpn. India vs. M/s. Garg Sons International (supra) is on the rule of contra-proferentem. Though the learned Counsel for Complainant did mention about this Rule and quoted the Order of the Hon’ble Supreme Court in Manmohan Nanda vs. United India Assurance Co. Ltd. & Anr., (2022) 4 SCC 582, wherein contra-proferentem rule has been discussed quoting Halsbury’s Laws of England as under:

"37.... Contra proferentem rule. Where there is ambiguity in the 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 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 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."

In my opinion, the relevance in this case does not arise as I do not see any ambiguity in the Policy.  

25. To sum up, the BSP figures, which were furnished by IATA at the time of invoking the claim, reflected the NAFL and it is not a notional loss. The loss was ascertained and accounted for after all adjustments and refunds that would have been processed via BSP before it was completely deactivated upon the agent’s termination. It was the BSP document which was essential for ascertaining NAFL and this was duly provided to the Surveyor including the airline wise break-up for computation of IATA’s claim. Based on this very BSP document, the Insurer had allowed claims in cases where the claim amounts were small, but arbitrarily repudiated when the claim amounts were large. In the report of the three Surveyors in CC No. 330/2015, CC No. 333/2015 and CC No. 339/2015, the assessment of loss has been made, out of which, the two Surveyors in CC No. 330/2015 and CC No. 333/2015 have even suggested payment of the claim as sought by the IATA.
26. It is a fact that whatever information that is available on the BSP is the only recognised information that is required under the Policy on which the NAFL is ascertained. Asking for further information from the airlines is not contemplated in the Policy. The Insurance Policy has been specially designed keeping in mind the working of the IATA / Airline business and the information that is available on the BSP which is the primary database and if certain information is not available on such database, the question of any extraneous information or data does not arise. The loss has to be seen in respect of default and the default is the amount, which was payable by the Agent to the Airlines through the medium of BSP. Any refund or any ACM or ADM that was to be issued have to be done only through the medium of BSP. It is also very clear from the Policy that the productivity linked bonuses (PLBs), which the Surveyor and Insurer have referred to for not having accounted for, are not part of the BSP. The question of any adjustment of these amounts does not arise as they do not form part of the Policy and are outside the realm of BSP. Therefore, in my opinion, the Net Ascertained Financial Loss has to be defined in terms of the Default of payment by the Agent on the BSP. This is also taking into account the fact that the Agent has not made any representation whatsoever regarding the notices, which only means that it has not disputed the figures.  This is also amply clear from the Order of the International Arbitration Tribunal, wherein once again, the Agent could not lay any claim on the Airlines or IATA.
27. The other objection / ground which has been highlighted at great length is non-supply of the documents for determining the loss. The documents to be provided are given in the Policy itself, which has been covered in the preceding paragraph ‘12’. These are six documents and the same have been duly furnished by the Complainant, which are also not disputed.

The learned Senior Counsel has submitted that these cannot be the only documents and the Surveyor and the Insurance Company have a right to seek such other documents as may be necessary for ascertaining the correct loss. It is to be noted that in the Policy, it is stipulated that ‘documentation of the claim will consist of the following documents’, which have already been covered in paragraph ‘12’ of this Order. The word to be taken note of is ‘will’. There was a difference in interpretation of the word ‘will’ by the two learned Counsel. In this regard, I would like to quote Black’s Law Dictionary, which defined the word ‘will’ as an auxiliary verb commonly having mandatory sense of ‘shall’ or ‘must’. “It is a word of certainty, while the word ‘may’ is one of the speculation and uncertainty” (Page 1598, Black’s Law Dictionary, 6^th Ed.). If the word ‘will’ is interpreted as ‘shall’, which I am inclined to do so, then the Policy envisages the six documents alone as all the documentation required for processing of a claim. Therefore, the Complainant cannot be required to go beyond the requirements of the Policy. It is also worthwhile to take note of Clause (vi) of the conditions of the Policy as under:

"The INSURED shall maintain adequate records in connection with the subject matter insured and such records will be made available to the Insurer upon reasonable notice to the INSURED, provided that breach of this clause by IATA shall not entitle the Insurer to refuse payment of a claim under this insurance Policy."

In view of the above, it is clear that the required documents were furnished by the Complainant and therefore, this argument of the Opposite Party fails.

28. On the objection / ground of cancellation of tickets not having been taken into account and consequently, the refunds and that when the details were asked from the Complainant especially with reference to the information provided by the Agent that it had a claim of Rs. 56.87 Crores from Airlines, which needed to be adjusted and IATA having advised Jet Airways not to part information, such a view has not been substantiated by any document or accounted and the word of the Agent has been taken into cognisance without any verification or documentation and evidence. In my opinion, this is not a relevant ground for rejection as the question of supply of any information beyond BSP does not arise. These were extraneous questions and, therefore, not relevant for deciding the case.
29. There is one more objection / ground raised by the Opposite Party and the Surveyor in relation to the determination of the NAFL / Loss.  The learned Senior Counsel for the Opposite Party in his oral arguments submitted that for determining the “Net in NAFL”, the entirety of IATA Resolution / Handbook has to be read together with the Policy as the same had been incorporated into the Insurance Policy. Further, the definition of NAFL incorporates ‘accountable air ticket transactions as defined under Passenger Sales Agency Rules’, ‘in accordance with IATA’s Sale Agency Rule and / or Reported And Remittance Procedure’. Even in the definition of Default of Agent, it is ‘Any and all conditions as per IATA Resolutions on Passenger Sales Agency Rules, and/or Reporting and Remittance Procedures, and/or Passenger Sales Agency Agreement applicable to IATA BSP’.
30. It would be worthwhile to read the Policy once again and the relevant portion is quoted as under:

"Other Definitions: By reference, “Definitions” listed in applicable IATA Resolutions are included in this Policy, provided that the definition in this Policy will prevail in the event of conflict between the latter and the IATA definitions.”

          It is seen that as per the above definition, the Policy expressly incorporates only the definitions contained in the IATA Resolutions and not the entirety of the said Resolutions. Mere reference does not amount to incorporation of the document referred to. In this regard, reliance is placed on the Order of the Hon’ble Supreme Court in M.R. Engineers and Contractors Pvt. Ltd. vs. Som Datt Builders Ltd., Civil Appeal No. 4150 of 2009, decided on 07.07.2009, wherein the relevant paras are as under:

8. There is a difference between reference to another document in a contract and incorporation of another document in a contract, by reference. In the first case, the parties intend to adopt only specific portions or part of the referred document for the purposes of the contract. In the second case, the parties intend to incorporate the referred document in entirety, into the contract. Therefore when there is a reference to a document in a contract, the court has to consider whether the reference to the document is with the intention of incorporating the contents of that document in entirety into the contract, or with the intention of adopting or borrowing specific portions of the said document for application to the contract. We will give a few instances of incorporation and mere reference to explain the position (illustrative and not exhaustive).

9. If a contract refers to a document and provides that the said document shall form part and parcel of the contract, or that all terms and conditions of the said document shall be read or treated as a part of the contract, or that the contract will be governed by the provisions of the said document, or that the terms and conditions of the said document shall be incorporated into the contract, the terms and conditions of the document in entirety will get bodily lifted and incorporated into the contract. When there is such incorporation of the terms and conditions of a document, every term of such document, (except to the extent it is inconsistent with any specific provision in the contract) will apply to the contract. If the document so incorporated contains a provision for settlement of disputes by arbitration, the said arbitration clause also will apply to the contract.

10. On the other hand, where there is only a reference to a document in a contract in a particular context, the document will not get incorporated in entirety into the contract. For example if a contract provides that the specifications of the supplies will be as provided in an earlier contract or another purchase order, then it will be necessary to look to that document only for the limited purpose of ascertainment of specifications of the goods to be supplied. The referred document cannot be looked into for any other purpose, say price or payment of price. Similarly if a contract between X and Y provides that the terms of payment to Y will be as in the contract between X and Z, then only the terms of payment from the contract between X and Z, will be read as part of the contract between X and Y. The other terms, say relating to quantity or delivery cannot be looked into.

Reference to the PSAA or the Travel Agent’s Handbook in the Policy does not effect incorporating each and other part of the said document into the Insurance Policy. There has not been any reference in the Policy regarding comprehensive incorporation. So, this argument of the Opposite Party fails.

31. To sum up, NAFL has been duly established. It has been ascertained. It is not notional. Default thereby Policy has triggered. The grounds put forth by the Insurance Company in this regard are found baseless and thereby rejected.
32. Another objection / ground raised by the Opposite Party and the Surveyor was on the issue of subrogation rights, which in the repudiation letter is referred to as having been seriously prejudiced in view of no significant action whatsoever been taken against the Agent either Civil or Criminal by IATA or the Airlines despite claim of default to such an extent. This has also been dealt with in the Surveyor’s Report. It is stated that the Agent continues to sell tickets for the Airlines, which appeared to find no necessity to avoid or dispense with its service. In this regard, Clause (iv) of the conditions of the Policy is relevant and the same is reproduced as under:

‘the insurer shall have full subrogation rights under this Policy to make recoveries from non-paying Terminated Agent within 30 days of payment of the claim submitted by the INSURED.’

          A reading of this condition makes it clear that the subrogation rights of the Insurer will arise only after settlement of the claim. In this regard, it is the Insurer, which has failed to comply with the timelines provided in law as well as the Policy terms for timely resolution of claims. In the Order of the Hon’ble Supreme Court in Municipal Committee Katra & Ors. Vs. Ashwani Kumar, 2024 SCC OnLine SC 840, it was observed that no man can take advantage of his own wrong by quoting the latin maxim ‘nullus commodum capere potest de injuria sua propria’. Once there is a breach of the Policy timeline by the Insurer itself, it cannot take benefits of its default and then claim that IATA has prejudiced its subrogation rights.

33. One other objection / ground in the Surveyor’s Report and in the repudiation letter was lapse of IATA in financial evaluation of the Agent. It was argued that due diligence was not done by IATA. It was also argued that IATA defied its own Resolution by not taking Bank Guarantee from the Agents in terms of Resolution 850p of the Travel Agent’s Handbook, which contains provisions with respect to financial security to be provided by the Agent. It reads as under:

“WHEREAS certain Sales Agency Rules provide that an Agent may meet the financial criteria by the provision of additional financial security in the form of a bank guarantee, insurance bond, or default insurance scheme ("DIP" scheme) (including trust fund);

WHEREAS the Passenger Agency Conference (hereafter referred to as "the Conference") wishes to make a wide range of financial securities available to Agents; and

WHEREAS non-payment of a claim against a provider of such financial security will result in financial loss to Members and Airlines;”. 

It is further pertinent to note that “Local Criteria” are provided for various regions for the financial standing of agents as part of the standards for accreditation and retention of agents. With respect to India, the local criteria provides that:

"Computation of the quantum of financial support by way of Bank Guarantee or Default Insurance Cover to be provided by any IATA Accredited Agent in India shall be in accordance with the following criteria:

1. Bank Guarantee or Insurance Cover shall cover the Agent's average 35 days cash sales (productivity) during the 12 months immediately preceding the date when such computation/determination is made.

2. Agents desirous of participating in a Default Insurance Programme or providing insurance cover against the risk of default as an alternative to providing a Bank Guarantee may do so subject to complying with all requirements of the lead insurer.

NB: All providers of Financial Guarantees or insurance cover shall be only those approved by IATA and financial evaluation by the financial assessor of IATA will be final.”

A careful reading of the above provision shows clearly that it was optional for STPL either to furnish the Bank Guarantee or take the default insurance cover, so as to indemnify IATA against the risk of default. As per the Attachment to the Policy, STPL was one of the agents, which had opted to participate in the Policy scheme. Thus, this argument and objection / ground fail. In fact, making such objections / grounds, the Surveyor weakens his Report and shows that he has not carefully read the Policy and the related documents. The Policy has to be strictly construed and limited to its content.

34. It would be also relevant to analyse the Surveyor’s reports in the five Complaints and bring out certain inconsistencies, which grossly weaken the case of the Surveyor and the Insurance Company.

(i)        In CC No. 330/2015, where the claim amount was Rs. 2,67,98,452/-, the Surveyor recorded that IATA complied with the service of notices of Default, Irregularities and Termination under the Resolutions and found that all the covenants of IATA’s Resolution with its Agent have been complied with. The Surveyor concluded that the IATA’s claim ‘tenable under the Policy and the Insurer would be liable thereunder and that the Insurer could obtain a letter of subrogation from the beneficiary to protect their recovery rights under the Policy. Despite a clear report, the Insurer repudiated the claim without assigning any cogent reasons from departing from the Surveyors report. In this connection, it would be worthwhile to put reliance in the Order of the Hon’ble Supreme Court in National Insurance Co. Ltd. vs. Vedic Resorts and Hotels Pvt. Ltd., Civil Appeal No. 4979/2019, decided on 17.05.2023, wherein it was held as under:

14. It is trite to say that wherever such an exclusionary Clause is contained in a policy, it would be for the insurer to show that the case falls within the purview of such clause. In case of ambiguity, the contract of insurance has to be construed in favour of the insured.

17. In the instant case, the Appellant-Insurance Company had failed to discharge its burden of bringing the case within the exclusionary Clause V(d) of the policies in question. The surveyor in the Final Survey Report dated 16.06.2011 had also opined that the loss had occurred due to the insured peril and the claim was admissible. Though it is true that the Surveyor's Report is not the last and final one nor is so sacrosanct as to the incapable of being departed from, however, there has to be some cogent and satisfactory reasons or grounds made out by the insurer for not accepting the Report. We are afraid in the instant case, the Appellant-Insurance Company has failed to make out any such cogent reason for not accepting the surveyor's Report.

               Further, this Report shows the weakness in Repudiation on ground of subrogation rights having been compromised, if only the Insurer had acted promptly such allegation could not have arisen.

(ii)        In CC No. 331 of 2015, where the claim amount was Rs. 23,88,19,953/-, the Surveyor noted that IATA submitted all documents as required under Clause (viii) of the Policy, but noted that NAFL could not be assessed owing to non-submission of certain additional documents. The Surveyor made certain assumptions based on the audit statement of the Agent, which, however, do not form part of the grounds of repudiation under the Policy. In this particular case, the Insurer has also contended that the termination of the Agent was issued vide letter dated 10.02.2014, which is outside the Policy period and thus the claim is not required to be indemnified. In this connection, the Complainant had rightfully submitted that the loss incurred was owing to the default by the Agent and the Policy was triggered on default notified by the Notice of Default dated 10.12.2013, which was well within the Policy period. It was only the termination notice that was sent on 10.02.2014 in order to provide a cure period of 60 days to the Agent to clear the outstanding in the BSP.

(iii)       In CC No. 332 of 2015, where the claim is Rs. 2,58,05,495/-, the Surveyor asked for many documents beyond the documents stipulated in the Policy. The Surveyor concluded that due to non-provision of the additional documents demanded, NAFL was not established and thus the Insurer could consider closing the claim.

(iv)       In CC No. 333 of 2015, where the claim amount was Rs. 1,54,03,336/-, the Surveyor noted that IATA had complied with all the notices required and that any breach of clause to maintain records of the Agents cannot be a ground of repudiation of the claim. The Surveyor also notied that IATA had made attempts to recover outstanding dues from the Agents and had even negotiated a settlement plan, however, the agent had defaulted on the instalment under the said settlement plan. The Surveyor assessed NAFL (loss). The Insurer, however, repudiated the claim, without giving any “cogent and satisfactory reasons or grounds” for not accepting the Report. In this regard, the Order of the Hon’ble Supreme Court in National Insurance Co. Ltd. vs. Vedic Resorts and Hotels Pvt. Ltd. (supra) is relevant.

(v)       In CC No. 339 of 2015, where the claim amount is Rs. 63,91,37,000/-, the Surveyor found that the Insurer’s liability was not engaged and the Policy was not triggered for inter alia the reasons:

1. No NAFL was provided or confirmed by IATA and
2. IATA has not taken any action against the wrong doing on the Agent’s part and thus not acted as a prudent insured.

The Surveyor, however, did assess the NAFL and the loss incurred by IATA on account of default by STPL (Agent). In his report, the Surveyor records that STPL has a counter-claim of Rs. 93.32 Crores towards the following heads:

Thereafter, he notes that certain amounts are not admissible like PLBs (Bonuses) and Advances which are outside BSP and refunds relating to Air India and Kingfisher airlines not being part of claim and comes to the conclusion that only Rs. 56.87 Crores is the assessed counter-claim of the STPL which are refunds due from Jet Airways. After taking into account this figure, the claim of IATA was determined by deducting this amount from their claim of Rs. 124.31 Crores leaving the balance of Rs. 67.44 Crores only as the rightful claim. He further noted that since the sum insured was only Rs. 63.91 Crores, therefore, ‘as such the claim amount is restricted to Rs. 63.91 Crores.’ After arriving at such figures, he later recommended dismissing the claim on the ground that NAFL was not provided by IATA. This is not understandable. This claim of Rs. 93.32 Crores by STPL is found to be without any basis and no evidence has been recorded or documents noted which would substantiate such claims. The Surveyor is also not clear as to how he obtained this information from STPL, except citing an email from STPL. He should have asked for some supporting document.  As has already been noted earlier that STPL never disputed the notices of Default, making such submission of counter-claim to the Surveyor is without basis. The right place to make counter claim should have been at the time of receipt of notices of Irregularity and Default as provided for in the Passenger Sales Agency Agreement and the Travel Agent’s Handbook. Making an alleged statement through an email before the Surveyor without providing any evidence or affidavit is not admissible. I am reproducing the email of STPL as reported in the Report as under:

“As per the e-mail dated 25^th Sept. 2013 by STPL:

1) We clearly assert that information put forth by IATA or airlines is as per their suitability and the perspective of the travel agency (Spring Travels) has been conveniently ignored making it a lopsided understanding of the situation.

2) In principle, the amount payable by us needs to be ascertained after deducting the sum total of refunds, PLBs and advances paid to airlines against which the sale could not be made.

3) As on date, we have a valid counter claim of nearly 93.32 Crore which needs to be deducted from the claimed outstanding figure. This figure has been tabulated for refunds claimed on travel scheduled till March 2013 whose issuance pertains for the period April 2012- March 2013. This figure would further accentuate if we take into account probable refunds emanating out of travel scheduled till march 2014. The exact figure for refunds can only be arrived at with passage of time as IATA rules allow refunds requests up to two years from the date of travel. It can be safely assumed that the figure for refunds will definitely exacerbate due to the above mentioned possibility of our clients applying for such refunds in future pushing up the figure of 93.32 crore significantly higher.

In this regard, it would be not out of place to quote certain relevant paragraphs of the arbitral award adjudicated by the International Arbitral Tribunal, which are reproduced as under:

“141. STPL in its Statement of Defence referred to Refund/ Productivity Link Bonus/ Commissions due to it. However, STPL has filed no counterclaim in the arbitration and is not claiming any set-off as it has itself admitted and stated. As STPL had not made or filed a counterclaim for refunds or claimed a set-off, these paragraphs in the Statement of Defence have no relevance and the Tribunal ought to disregard such averments/ allegations of STPL.

143. Further, STPL's inability to execute refund transactions to its customers who booked and cancelled flights was well settled process under the Passenger Sales Agency Agreement and the Reporting and Remittance Rules. An agent who is in default ceases to have authority under the BSP and must therefore direct his customers to seek refunds directly from the relevant member airline. Any perceived grievance of the STPL was self-inflicted and does not eclipse its primary obligation to make remittances of payments to IATA under the BSP process. Under the terms of Clauses 6 and 7 of the PSA STPL was under an obligation to issue tickets for passengers only after receipt of monies and to hold the same in trust for the Member Airlines of IATA. As STPL's accreditation with IATA was terminated vide letter dated May 2013 with immediate effect, it no longer had any authority to issue any Standard Traffic Documents or issue refunds to its customers if it did so at all.

144. STPL is not owed is and would not have been owed any monies by way of refunds unless it had submitted the tickets for refunds before the default date, and if it had done so, the transactions would have been part of and reflected in the BSP...

145. The amounts claimed in the arbitration in are based on the BSP records which had taken into account all adjustments, if any, including for refunds made prior to the date of the default.”

          The issue of refund is the main argument and ground of the Surveyor and the Opposite Party to conclude that NAFL / loss has not been ascertained and such refunds being a continuing process, no defined timeline can be given and, therefore, such loss cannot be determined and consequently indemnified. If this reasoning is accepted, no Policy should have been issued in the first instance as an Insurance Policy cannot be so open ended and left to interpretation. In my opinion, the Policy does not suffer such open endedness. Such argument is baseless.

35. It is thus seen that the Surveyor’s assessments is without any basis and cannot be taken as a proper assessment. Also it is evident that the Surveyor had been adopting contradictory positions and findings. It is noticed that the Surveyors have taken different positions in the five Complaints for the same Policy. NAFL has been assessed in three cases (CC No. 330/2015, CC No. 333/2015 and CC No. 339/2015 but not in CC No. 331/2015 and CC No. 332/2015). It appears that they have been guided more by the quantum of claim and, therefore, have taken contradictory positions without substantiating the reasons for doing so. In the light of the preceding paragraphs, the Surveyors reports lose their significance and so do the arguments of the learned Senior Counsel for the Opposite Party that the Commission cannot do forensic ‘dissection’ of the Surveyor’s report. In support of his argument learned Senior Counsel relied on Khatima Fibers vs. New India Assurance, 2021 SCC Online 818, wherein the relevant paragraphs are as under:

34. But the Proviso to sub-section (2) of section 64UM also recognized the right of the insurer to pay any amount different from the amount as assessed by the approved surveyor or loss assessor. The proviso reads as follows:

"Provided that nothing in this sub-section shall be deemed to take away or abridge the right of the insurer to pay or settle any claim at any amount different from the amount assessed by the approved surveyor or loss assessor."

35. This is why the law is settled that the surveyor's report is not the last and final word. It has been held by this Court in several decisions, that the surveyor's report is not so sacrosanct as to be incapable of being departed from. A useful reference can be made in this regard to the decision of this court in New India Assurance Company Limited v. Pradeep Kumar.

36. The Insurance Act, 1938 even while assigning an important role for the surveyor, casts an obligation on him under sub-section (1A) of section 64UM to comply with the code of conduct in respect of his duties, responsibilities and other professional requirements as specified by the regulations made under the Act. This provision reads as follows: "(1A) Every surveyor and loss assessor shall comply with the code of conduct in respect of their duties, responsibilities and other professional requirements as may be specified by the regulations made by the Authority.

37. Two things flow out of the above discussion. They are (i) that the surveyor is governed by a code of conduct, the breach of which may give raise to an allegation of deficiency in service, and (ii) that the discretion vested in the insurer to reject the report of the surveyor in whole or in part, cannot be exercised arbitrarily or whimsically and that if so done, there could be an allegation of deficiency in service.

38. A Consumer Forum which is primarily concerned with an allegation of deficiency in service cannot subject the surveyor's report to forensic examination of its anatomy. just as a civil court could do. Once it is found that there was no inadequacy in the quality, nature and manner of performance of the duties and responsibilities of the surveyor, in a manner prescribed by the Regulations as to their code of conduct and once it is found that the report is not based on adhocism or vitiated by arbitrariness, then the jurisdiction of the Consumer Forum to go further would stop. 

The Order of the Hon’ble Supreme Court is to be read in entirety. The Surveyors have not acted in these Complaints in a manner, which was expected of them as prescribed under their Regulations of Conduct and that in my opinion their reports are definitely vitiated by arbitrariness and that this case law also is in support of the fact that the Surveyor reports are not reliable for arriving at the decision whether the claim is admissible or not and whether there has been a deficiency of service on the part of the Insurer. In this regard, I would like to rely on a few Orders of the Hon’ble Supreme Court. In New India Assurance Co. Ltd. vs. Pradeep Kumar, Civil Appeal No. 3253 of 2002, decided on 09.04.2009, the Hon’ble Supreme Court has held that the approved Surveyor’s report may be basis or foundation for settlement of a claim by the Insurer in respect of the loss suffered by the Insured, but surely such report is neither binding upon the Insurer nor the Insured.

In Texco Marketing Pvt. Ltd. vs. Tata AIG General Insurance Co. Ltd. & Ors., (2023) 1 SCC 428, certain relevant paragraphs are as under:

A similar view is taken in Modern Insulators Ltd. v. Oriental Insurance Co. Ltd., (2000) 2 SCC 734:

“(8) It is the fundamental principle of insurance law that utmost good faith must be observed by the contracting parties and good faith forbids either party from non-disclosure of the facts which the parties know. The insured has a duty to disclose and similarly it is the duty of the insurance company and its agents to disclose all material facts in their knowledge since the obligation of good faith applies to both equally.”

Though, in the Policy under consideration, no exclusion clause has been specifically provided for, that some of the grounds of rejection are indicative of certain exclusions, which cannot be taken into cognisance unless these were specifically mentioned in the Policy itself.

36. There were two other objections / grounds of the Opposite Party, which I would deal in a summary manner. The first is that no action was taken against the Agent and that the Agent continues to do business as dealt with by the Surveyor in his Report and that FIRs were not filed. However, the Surveyor does also note that Complaints have been filed with Economic Offence Wing, Crime Branch, Delhi by the airlines. I do not agree with the Surveyor that it should be IATA which should file the criminal complaints. It is to be noted that IATA only provides the platform. It is the airlines that are owed these monies. In my opinion, the airlines are the correct body to file the complaints. With regard to STPL doing business, it is seen that they are using certain third party travel agents for booking tickets as an intermediary and therefore, to that extent, IATA’s responsibility cannot be held. Without doubt STPL cannot operate on the BSP platform and consequently, cannot directly issue any tickets.  Anybody can book tickets on a third party platform. On the issue of FIRs, the Complainant did mention about FIRs having been filed by the Airlines, which proves that action was taken by IATA and the Airlines to mitigate the loss.  These cannot be grounds for rejecting the claims. In this regard, I would like to rely on the Order of the Hon’ble Supreme Court in Ashok Kumar vs. New India Assurance Co. Ltd., (2023) SCC OnLine SC 893, wherein it has been held that fundamental breach of insurance policy is necessary for repudiation of a claim. I do not see any fundamental breach on the part of the Insured.
37. There were certain other arguments made by the learned Senior Counsel for the Opposite Party. However, such arguments which are beyond the grounds mentioned in the repudiation letter cannot be taken into account at this stage. Reliance is placed on the Order of the Hon’ble Supreme Court in JSK Industries Pvt. Ltd. vs. Oriental Insurance Company Ltd., (2022) SCC OnLine SC 1451, wherein it was observed as under:

10. Mr. Gopal Shankarnarayan, learned senior counsel for the appellants has argued both on substantive and procedural points to assail the aforesaid orders. His first submission is that the insurance company cannot resist a claim petition on grounds beyond those cited by them while repudiating a claim. In support of this argument, a decision of this Court in the case Saurashtra Chemicals Ltd. v. National Insurance Co. Ltd. [(2019) 19 SCC 70] has been cited. In this judgment, it has been held:-

"23. Hence, we are of the considered opinion that the law, as laid down in Galada [Galada Power & Telecommunication Ltd. v. United India Insurance Co. Ltd., (2016) 14 SCC 161: (2017) 2 SCC (Civ) 765) on Issue (2), still holds the field. It is a settled position that an insurance company cannot travel beyond the grounds mentioned in the letter of repudiation. If the insurer has not taken delay in intimation as a specific ground in letter of repudiation, they cannot do so at the stage of hearing of the consumer complaint before NCDRC."

38. In arriving at a reasoned Order in this case, in my considered view, I have to rely upon the Order of the Hon’ble Supreme Court in Canara Bank vs. United India Insurance Co. Ltd. & Ors., (2020) 3 SCC 455, wherein it has been clearly held that the provisions and terms of the policy have to be strictly construed and exclusion clauses read narrowly. The relevant paragraph reads as under:

22. The principles relating to interpretation of insurance policies are well settled and not in dispute. At the same time, the provisions of the policy must be read and interpreted in such a manner so as to give effect to the reasonable expectations of all the parties including the insured and the beneficiaries. It is also well settled that coverage provisions should be interpreted broadly and if there is any ambiguity, the same should be resolved in favour of the insured. On the other hand, the exclusion clauses must be read narrowly. The policy and its components must be read as a whole and given a meaning which furthers the expectations of the parties and also the business realities. According to us, the entire policy should be understood and examined in such a manner and when that is done, the interpretation becomes a commercially sensible interpretation.

39. Before concluding, it would be important to mention the Arbitral Award of International Arbitral Tribunal dated 21.04.2022, which was filed by the learned Counsel for the Complainant by way of an application I.A. No. 4121/2023 dated 28.03.2023. An opportunity was granted to the Opposite Party to file their reply. The Opposite Party took the stand that this application should not be allowed and the Arbitration Award ought not to be taken in cognizance as the admissibility of the claim under the Insurer’s Policy has to be adjudicated independently.
40. Learned Senior Counsel for the Opposite Party argued that Arbitration Award cannot be a substitute to adjudicate the admissibility of claims under the Insurance Policy and also that the issues and parties are different. The learned Counsel for the Complainant, however, argued that in a Complaint subsequent events can be taken on record. He cited the Order of this Commission in Sanjay Kumar Baranwal & Ors. vs. Selene Constructions Ltd., (2016) SCC Online NCDRC 1511, wherein it was held that “there lies no rub in taking note of the subsequent event”.  

He further submitted that the Arbitral Award is a crucial document produced by the Complainant in order to counter the allegations that the Complainant i.e. IATA did not act as a prudent uninsured and did not take steps to recover the dues from the Agent. He further submitted that the Arbitral Award forms part of the judicial record and as such taking the same on record would not cause any prejudice to any party. He cited Section ‘86’ of the Indian Evidence Act, 1872, under which there is presumption to be drawn that the certified copy of the Foreign Judicial record is genuine and accurate.

41. While in this Order, no direct reliance is placed on this Document, it would be in order to note the findings for a greater clarity and to the fact that the Agent did not make any counter claim as required and the whole argument of the Opposite Party regarding refunds and consequently, not assessing the loss, fails. The Arbitration has been done between IATA and the STPL, the agent in CC No. 339/2015. In this Award, it is to be noted that the Tribunal held STPL owing an amount of Rs. 124,31,67,193/- and the amount claimed by IATA are net of refunds. Further, STPL did not file any counter-claim for refunds or claimed a setoff in response to its averment that it is entitled to refund / productivity linked bonus / commission. On the other hand, STPL admitted, in its statement of defence, the Billing and Settlement Plan records. It was also observed that once the Agent is outside the BSP, a customer can seek refund directly from the concerning member Airline. On termination, an agent no longer had any authority to issue any standard traffic documents or issue refunds to its customers, if it did so at all. The STPL is not owed and would not have been owed any money by way of refunds, unless it had submitted the tickets for refunds before the default date, and if it had done so, the transactions would have been part of and reflected in the BSP. The STPL has raised a frivolous plea, in its statement of defence, that it had made refunds from its own accounts, funds, but there was not an iota of evidence such as bank statements or records to substantiate these averments. In the absence of such evidence, adverse inferences should be drawn against STPL claims and in favour of IATA. In any event, these unsubstantiated averments cannot detract from the non-payment of the amounts due and payable.  Further, I am reproducing certain relevant paragraphs of the Award as under:

113. The BSP is an automated system under which the agent, in this case STPL, originates and creates the data on, inter alia, tickets sold and payments collected which it then inputs into the BSP system by way of a BSP-link.

114. IATA points out that STPL itself has not denied that the payments claimed were due in accordance with the remittance schedule28. STPL in fact requested for an extension of time to pay as stated in STPL's statement of defence dated 14 July 2021 stating "The Respondent for the delayed fortnightly payment of the Claimant, had requested the IATA to give the Respondent a 10-15 days relief to make payments...” as an admission of sorts.

115. In the event, when STPL failed to make the required remittance by 25 March 2013 for the billing period 1 March 2013 to 15 March 2013, IATA issued a Notice of Irregularity to STPL on 26 March 2013 (in accordance with Resolution 818g. Attachment A, Para 1.7.2 and Para 1.9) informing STPL, inter alia, that:

a.    The remittance due was not received by 25 March 2013;

b.    IATA demanded immediate settlement of the sums due before the close of business on 28 March 2013; and

c.     The failure to settle the overdue remittance by the aforesaid date would result in default action being taken.

116. STPL then responded by letter on 26 March 2013 stating, inter alia:

"We were in the process of changing our Bankers from Bank of India and we had applied on 27 Feb to Dena Bank for our credit limit of Rs.60.50 CR thinking that we will get this amount for payment of 28 March."

117. What happened apparently, on STPL's own account30, was that STPL previously had a banking credit facility with the Bank of India but in March 2013 or thereabouts changed its bank to Dena Bank to obtain an enhanced credit limit. Due to certain matters relating to due diligence and other formalities to obtain the enhanced credit facilities, these credit facilities did not materialise or did not materialise within the expected time which resulted in the non-payment. STPL however characterized this as a pretext for non-payment.

118. Now, when a Notice of Irregularity is sent to an agent, the agent may, within 30 days thereof, seek a review by the Travel Agency Commissioner (TAC). STPL did not invoke this procedure.

119. Due to STPL's failure to settle the overdue remittance by 28 March 2013, IATA then issued on 28 March 2013 a Notice of Default pursuant to Resolution 818g, Attachment A, Para 1.10, informing STPL, inter alia, that:

a. Due to the failure to make timely settlement of the monies due, default action has been invoked by the Agency Administrator with respect to all STPL's Approved Locations;

b. All STDs had been withdrawn and that IATA demanded an immediate accounting and settlement of all amounts due from STPL;

c. Notice of termination of the PSAA would be given, to take effect on 30 April 2013 at the earliest, save that should STPL make payment of all outstanding amounts or paid 50% of the outstanding amount and agreed on a firm schedule of repayment of the balance in instalments, the termination of the PSA would not take effect.

120. STPL however failed to settle the outstanding monies due to IATA. On 1 May 2013, IATA then issued a Notice of termination of the PSA pursuant to Resolution 818g. Attachment A, Para 2.1.2, stating, inter alia, that:

a. The PSA had been terminated with immediate effect; and

b. If the STPL disagreed with the decision, they could invoke the procedures set out in Resolution 820e for review of the Agency Administrator's action by the TAC.

121. IATA noted that that pursuant to the terms of Resolution 818g, Attachment A, STPL could, on two occasions, have sought a review of the Agency Administrator's actions by the TAC, when the Notice of Irregularity dated 26 March 2013 was issued and/or when the Notice of Termination of the PSAA dated 1 May 2013 was issued. STPL did neither within the permissible periods (but attempted to do so only approximately 14 months later, by way of an email dated 23 May 2014, by which time, it was too late.)

122. After STPL was declared as in default and its agency accreditation terminated, it ceased to have ticketing authority under the BSP. Prior to that, refunds made by STPL to its customers would have been stated by STPL and recorded in the BSP system by STPL itself. After being declared in default, if refunds had to be made to STPL's customers, STPL would have to direct its customers to seek refunds directly from the Member Airlines themselves.

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143. Further, STPL's inability to execute refund transactions to its customers who booked and cancelled flights was a well settled process under the Passenger Sales Agency Agreement and the Reporting and Remittance Rules. An agent who is in default ceases to have authority under the BSP and must therefore direct his customers to seek refunds directly from the relevant member airline. Any perceived grievance of the STPL was self-inflicted and does not eclipse its primary obligation to make remittances of payments to IATA under the BSP process. Under the terms of Clauses 6 and 7 of the PSA STPL was under an obligation to issue tickets for passengers only after receipt of monies and to hold the same in trust for the Member Airlines of IATA, As STPL's accreditation with IATA was terminated vide letter dated 1 May 2013 with immediate effect, it no longer had any authority to issue any Standard Traffic Documents or issue refunds to its customers if it did so at all.

144. STPL is not owed and would not have been owed any monies by way of refunds unless it had submitted the tickets for refunds before the default date, and if it had done so, the transactions would have been part of and reflected in the BSP. STPL had raised a frivolous plea in its Statement of Defence that it had made refunds from its own accounts/funds but there was not an iota of evidence such as bank statements or records to substantiate these averments. In the absence of such evidence, adverse inferences should be drawn against STPL's claims and in favour of IATA. In any event, these unsubstantiated averments cannot detract from the non-payment of the amounts due and payable.

42. After having discussed the grounds and issues, conclusion would be in order. In this specially created Insurance Policy, both the parties entered into the contract with full knowledge of the background and the implications. It is to be noted that this Policy between IATA and United India Insurance Co. Ltd. under question was not a first time Policy, but was continuing for a number of years. In the past, the Insurance Company did honour the claims of the Insured IATA and therefore, to this extent, it cannot be said that it was not aware of the nitty-gritty of the working of the entire BSP system and the indemnification of loss based on ascertained NAFL. The key component in the entire contract and fulcrum is the operation of the BSP platform, which is though a technical matter, but also a very efficient electronic billing system of managing three players in the scheme: the airlines which are the part of the BSP, the agents who have been accredited by IATA on behalf of the Airlines and the IATA which manages the platform and facilities the commercial operation between Airlines on the one hand and the Agents on the other hand. The Agents are accredited to issue tickets on behalf of the Airlines through the medium of BSP and whatever financial transactions that take place either on behalf of the Agent or on behalf of the Airlines happen through the medium of BSP. IATA is an interface to facilitate issuing of standard traffic documents (tickets) by the Agents and the remittance of amount to the concerned airlines duly taking into account any credit and debit memos as defined. However, there are certain transactions like the provisions of bonus provided by Airlines, which are not part of the BSP and this has been very categorically recorded in the various documents that govern the relationship between the two parties.
43. The thrust of the argument of the Insurer is the NAFL, which has been indemnified has not been ascertained and that there are refunds, which are possible as a ticket may be cancelled and when it is cancelled, the amount needs to be refunded. On the face of this argument, it appears convincing more so, when certain clauses are there to this effect in the concerned IATA’s Resolutions. However, on a careful reading and also understanding the Scheme of operation of BSP and the relationship between the parties, it is clear that a refund is possible only when the Agent has made the payment on the BSP to the Airline. It is not the case of the Insurer that payment has been made outside the BSP. If a payment has been made on the BSP by the Agent to the concerned Airline, then the question of refund, if any, would be routed through the BSP channel only. Now, in these cases, notices for default by the Agent was issued by IATA when the Agent did not make payment of the amount received by it towards sale of tickets by them on the platform of BSP. When once the notice for default was issued till the date of termination, all transactions including refund or the credit or debit memos are processed only through the BSP. This will stop at the time of termination. The Insurance Policy is for indemnifying the NAFL at the time of the termination. This amount gets reflected on the BSP platform. Access to BSP was given to the Surveyors. If there is any amount, which the Agent has to receive, it will automatically get reflected in the BSP, keeping in mind that its dues on account of bonus would not be a part of such transactions. The Insurance Company has gotten confused with the reading of the Insurance Policy, which it itself has issued and is referring to transactions like bonus, which are not part of the BSP and accordingly not part of the Policy. It also appears that the Insurance Company wants to wait for an indefinite time to work out all the refunds, which theoretically possible in due course, but considering the fact that if the Agent has not remitted the amount for the ticket sold by it on BSP platform, the question of refund of such amount by the Airlines to the agent does not arise. Therefore, the argument that NAFL has not been arrived at or ascertained and that the loss has not triggered till all refunds are made becomes meaningless. Further, the Policy says loss at the time of termination, which has to be indemnified. Loss at the time of termination can only be determined on BSP and this information was made available to the Surveyor.
44. The Insurance Company in the Policy has listed out what documents it required from the Insured for settling the claim. Here, it cannot take a belated stand of asking for certain documents including those from the Airlines, which are not part of the Policy. In fact, the correct position is that the Policy revolves strictly around the BSP and therefore, the question of any other document does not arise. The Insurance Company did not provide any exclusion clause or did not provide for itself any scope for seeking other documents in the Policy and therefore, at this belated stage, after the claim having been filed, cannot raise these objections / grounds. It is also to be noted that the repudiation letters were more or less uniformly issued by the same Officer, though the Agents were in different parts of the country and that it did the same after taking unduly long time. It is also very clear that the Surveyors also have adopted inconsistent methodology and come to different conclusions, showing that either they have not understood the Policy or they considered the amount of claim to determine the admissibility of the claim. It has to be understood that the Insurance Company has been taking huge premium amount over the years for issuing such Policy. It cannot adopt contradictory positions while settling claims when confronted with a heavy amount. The Insurance Company should have been careful at the time of issuing the Policy and making it more elaborate taking in account that there can be a possibility of default and then in such case, it will have to make payments in terms of the Policy. The amounts involved were known to it. Safeguards, conditionalities and exclusions cannot be taken belatedly in an Insurance contract, but have to be spelt upfront. In fact, the case has been made very complicated by the Insurance Company, whereas the Policy is very straightforward and clear. There cannot be any question or doubts in so far as ascertaining the loss (NAFL), as it is the default amount which is payable by the Agent at the time of termination for the period in question. If the payment for the tickets sold during a specified time has not been done by the Agent during the time provided to it, the Insurance Company is duty bound to indemnify such loss arising out of default in payment as per Policy and such amount is clearly reflected in the final summary of accounts on the BSP platform for the period in question. It is to be noted that both selling of the ticket and making payment are on BSP platform. The argument of the Insurance Company that there can be a refund of a ticket sold prior to the period covered under Default is unacceptable as ample time during the default period was provided to the Agent to seek adjustments which it has not done. Further, why should it refund any cancelled ticket when it is already under notice. So this argument of Insurance Company makes no sense.  In fact, the Policy is so clear cut that it hardly gives a scope to the Insurance Company to raise any extraneous questions. The Insurance Company should have known what kind of Policy it was issuing. It cannot run away at this stage.
45. In final conclusion, these five Complaints are maintainable under the Act. I am relying on the Order of the Hon’ble Supreme Court in National Insurance Co. Ltd. vs. Harsolia Motors and Ors. (supra). The Complainant being a Consumer under Section 2(1)(d)(ii) read with Sections 2(1)(m) and 2(1)(o) of the Act are legally entitled to seek relief and indemnification against loss arising out of contingency as clearly defined in the Policy. Undoubtedly, the Insurance Company is deficient in service as defined in the Act and liable for indemnifying the loss.
46. In view of the aforesaid, all the five Consumer Complaints are allowed. The Insurance Company is directed to pay the Complainant the claim amounts in each of the cases limited to the sum insured in the concerned Policy, alongwith interest @ 6% per annum from one month after the date of respective Surveyor’s report till the date of making payment within eight weeks of this Order, failing which the rate of interest shall stand enhanced to 9% per annum for the same period.
47. Pending applications, if any, stand disposed of.