1997 Supreme(Cal) 205

High Court Of Calcutta
S. B. SINHA
ASSAMBROOK EXPORTS LTD. - Appellant
Versus
EXPORT CREDIT GUARANTEE CORPN.OF INDIA LTD. - Respondent
W. P.  409  Of  1996
Decided On : 05/15/1997

An insurer is liable to pay the claim of the insured for loss suffered due to failure of the buyer to pay within 4 months after the due date of payment, where the payment was to be made by barter exchange of goods but the barter system did not work and the insured did not accept the offer of the buyer to pay in US dollars, if the reasons assigned by the insurer for rejecting the claim are not proper and are beyond the terms of the cover, the insurer has failed to take into consideration the relevant facts and has considered an irrelevant factor, the insurer has insisted on a condition that the insured was bound to inform it that the barter system had failed, which did not exist, and the public confidence in a statutory corporation like the insurer would be shaken if the courts did not intervene in such matters.

Headnote:

INSURANCE - EXPORT CREDIT GUARANTEE - POLICY COVERING LOSS DUE TO FAILURE OF BUYER TO PAY INSUURED WITHIN 4 MONTHS AFTER DUE DATE OF PAYMENT - EXPORT OF TEA TO KAZAKHSTAN - PAYMENT TO BE MADE BY BARTER EXCHANGE WITHIN 120 DAYS - ADDENDUM TO CONTRACT - PAYMENT IN US DOLLARS IF BARTER SYSTEM NOT POSSIBLE - GUARANTEE BY MINISTRY OF FOREIGN ECONOMIC RELATIONS OF KAZAKHSTAN - LACK OF ACCEPTANCE OF BARTER SYSTEM BY INSURED - REJECTION OF CLAIM BY INSURER ON GROUND OF TRADE LOSS NOT COVERED BY POLICY - WRIT PETITION BY INSURED - HELD, INSURER LIABLE TO PAY CLAIM - REASONS ASSIGNED BY INSURER NOT PROPER AND BEYOND TERMS OF COVER - INSURER FAILED TO TAKE INTO CONSIDERATION RELEVANT FACTS AND CONSIDERED IRRELEVANT FACTOR - INSURER INSISTED ON CONDITION THAT INSURED WAS BOUND TO INFORM IT THAT BARTER SYSTEM HAD FAILED WHICH DID NOT EXIST - PUBLIC CONFIDENCE IN STATUTORY CORPORATION LIKE INSURER WOULD BE SHAKEN IF COURTS DID NOT INTERVENE IN SUCH MATTERS - INSURER DIRECTED TO HONOUR ITS COMMITMENT AND SETTLE CLAIM WITH INTEREST WITHIN 4 WEEKS.

Fact of the Case:

The petitioner, an exporter of tea, entered into a contract with a Kazakh company for supply of tea. Payment was to be made by barter exchange of goods within 120 days. An addendum to the contract provided that if the barter system could not be finalized for any reason, the Kazakh government would pay in US dollars within 120 days. The Kazakh government also issued an irrevocable guarantee for payment. The petitioner obtained an insurance policy from the respondent, a state-owned corporation, covering the risk of non-payment by the buyer. The tea was exported, but the barter system did not work. The Kazakh company and the Kazakh government admitted that they were unable to make payment due to economic difficulties. The petitioner lodged a claim with the respondent, which rejected the claim on the ground that the loss suffered by the petitioner was a trade loss not covered by the policy. The petitioner filed a writ petition challenging the rejection of its claim.

Finding of the Court:

The court held that the reasons assigned by the respondent for rejecting the claim were not proper and were beyond the terms of the cover. The court found that the respondent had failed to take into consideration the relevant facts and had considered an irrelevant factor. The court also held that the respondent had insisted on a condition that the petitioner was bound to inform it that the barter system had failed, which did not exist. The court further held that the public confidence in a statutory corporation like the respondent would be shaken if the courts did not intervene in such matters.

Issues: Whether the insurer was liable to pay the claim of the insured for loss suffered due to failure of the buyer to pay within 4 months after the due date of payment, where the payment was to be made by barter exchange of goods but the barter system did not work and the insured did not accept the offer of the buyer to pay in US dollars.

Ratio Decidendi: The court held that the insurer was liable to pay the claim of the insured because: * The reasons assigned by the insurer for rejecting the claim were not proper and were beyond the terms of the cover. * The insurer had failed to take into consideration the relevant facts and had considered an irrelevant factor. * The insurer had insisted on a condition that the insured was bound to inform it that the barter system had failed, which did not exist. * The public confidence in a statutory corporation like the insurer would be shaken if the courts did not intervene in such matters.

Final Decision: The court allowed the writ petition and directed the insurer to honour its commitment and settle the claim with interest within 4 weeks.