Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2008 Supreme(SC) 1537

2008(7) Supreme 533
SUPREME COURT OF INDIA
(From Calcutta High Court)
S.H. Kapadia and B. Sudershan Reddy, JJ.
M/s. Rahee Industries Ltd. — Appellant(s)
versus
Export Credit Guarantee Corpn. of India Ltd. and Anr. — Respondent(s)
Civil Appeal No. 6145 of 2008
(arising out of S.L.P. (C) No. 17369 of 2007)
Decided on : 17-10-2008

Advocates appeared:
For the Appellant :Uday U. Lalit, Sr. Adv., C. Mukund, Pankaj Jain, Amit Kasera, Avneesh Garg and Bijoy Kumar Jain, Advocates.
For the Respondents:Ghulam E. Vahanvati, SG., Bharat Sangal, Prasenjit Das, Ms. Ipsita Borthakur and Ms. Sanaya Dadachanji, Advocates.

IMPORTANT POINT
The expression “any sums recovered in respect of loss to which the Policy applies” in Clause 16 of Specific Shipments (Political Risks) Policy, 1987 would include US dollars paid belatedly and mean that all sums recovered from the buyer are to be divided in the proportion of 90:10 between the Corporation and the Exporter.

Headnote:(a) Interpretation of contracts – A policy should be considered by reference to its terms – If in case of any doubt or ambiguity in the construction of the policy it would be correct to invoke the principles of subrogation as a guide or a controlling authority. (Para 10)
        (b) Interpretation of contracts – If a debt in a foreign currency is sued for, the judgment must be in terms of Rupee and the rate of exchange will be the rate of exchange between Rupee and the foreign currency prevailing at the date when the debt becomes payable. (Para 11)
        1984 (Supp.) SCC 263 – Relied upon.
        (c) Specific Shipments (Political Risks) Policy, 1987 – The subject-Policy is a contract and an indemnity by nature and there is a difference between currency of account, currency of payment and currency of recovery – The currency of account is in US Dollar whereas the currency of payment of loss and premium is in Indian currency. (Paras 13 and 16)
        (d) Specific Shipments (Political Risks) Policy, 1987 – Clause 16 – Sums recovered must be in respect of loss which arises from the subject-matter of the contract – US dollars paid belatedly would therefore certainly fall within the expression “any sums recovered in respect of loss to which the Policy applies” – It would also mean that all sums recovered from the buyer are to be divided in the proportion of 90:10 between the Corporation and the Exporter. (Paras 16 and 17)
        (1974) 2 All ER 889 – Relied upon.
       Facts of the case :
        1. The question which arises for determination in this civil appeal and which revolves around interpretation of clause 16 of the Specific Shipments (Political Risks) Policy dated 27.1.87 is: where the loss, for which the Exporter (insured) has been indemnified by the insurer, is quantified and a fixed sum is set out in the insurer’s policy, being the total liability of the insurance company to the insured, would the insurer be entitled to receive anything more than what has been paid by it to the insured or would it (insurer) be also entitled to share the increased recovery that the insured may, at the future date, make from the original contract, to which the insurer is not a party?
       Finding of the Court :
        The expression “any sums recovered in respect of loss to which the Policy applies” includes US dollars paid belatedly and means that all sums recovered from the buyer are to be divided in the proportion of 90:10 between the Corporation and the Exporter.
       Result : Appeal dismissed.

JUDGMENT

S.H. Kapadia, J. —

Leave granted.

2. This civil appeal by grant of special leave petition is filed against judgment and order dated 17.8.07 passed by the Division Bench of the Calcutta High Court in APD No.302/2003 in Suit No.340 of 1992 whereby the Division Bench allowed the appeal preferred by respondent no.1 Corporation (insurer) and set aside the judgment and decree dated 4.4.03 passed by the learned Single judge of the High Court in Suit No.340 of 1992.

3. The short question which arises for determination in this civil appeal and which revolves around interpretation of clause 16 of the Specific Shipments (Political Risks) Policy dated 27.1.87 is: where the loss, for which the Exporter (insured) has been indemnified by the insurer, is quantified and a fixed sum is set out in the insurer’s policy, being the total liability of the insurance company to the insured, would the insurer be entitled to receive anything more than what has been paid by it to the insured or would it (insurer) be also entitled to share the increased recovery that the insured may, at the future date, make from the original contract, to which the insurer is not a party?

FACTS

4. On 8.10.85 M/s. Ramchander Heeralal (predecessor of the present appellant) entered into an agreement with the Egyptian National Railways (foreign buyer) for supply of 20 lakhs clips bolts for a total value of US$.6,15,200, FOB Calcutta. Under the said contract 20% of the total value of the contract was payable as advance against presentation of a letter of guarantee covering the same amount and 80% of the total contract value had to be financed for 3 years, to be paid in six equal semi-annual consecutive instalments with fixed interest at 9% p.a., the first instalment to be paid after six months from the date of each shipment. Initially the Exporter got 20% of the invoice value as advance. The goods were exported on credit for the balance price of 80% which was covered to the extent of 90% by Specific Shipments Policy No.14499/1987 (‘Policy’, for short). The consignee duly received the goods and paid the entire consideration price by depositing the same with its banker(s) at Egypt who was supposed to transfer the same to respondent no.2- HSBC Bank in India. However, because of embargo imposed by the Egyptian Government the banker(s) of the consignee could not transfer the moneys to HSBC Bank. Since the Exporter did not get the balance price within time from its consignee they applied to the Export Credit Guarantee Corporation (“Corporation”, for short) under the said Policy to pay for the risk (cause) covered being 90% of the balance price which was duly paid by the Corporation. Subsequently, after the embargo came to be lifted, the Egyptian Bank transferred the money to HSBC in India. Disputes then started as to who would be entitled to the said sum and to what extent. Disputes arose because of fluctuation in the exchange value. The price was received in US Dollar by HSBC. By the time it reached India the same got appreciated. The exchange rate of US Dollar resulted in increased recovery. The Exporter filed the suit. During the pendency of the suit HSBC disbursed whatever sum recovered after converting the same in Indian Rupee to the concerned parties in the ratio of 90:10 between Corporation and Exporter. The Exporter contended that the Corporation should pay the full increased recovery to it whereas Corporation contended that the same should be apportioned in the ratio of 90:10 in terms of Clause 16 of the said policy. The learned Single Judge decreed the suit in favour of the Exporter against which the Corporation went in appeal by filing APD No.302 of 2003. By the impugned judgment dated 17.8.07, the Division Bench held that the Corporation was entitled to 90% of the increased recovery against which this civil appeal is filed by the Exporter.

ISSUE

5. The short question which arises for determination in this civil appeal is : whether the insurer (Corporation) was en

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