Insurance cover cannot be provided for risks that have already materialized, and only approved receivables are covered under the Export Factoring Agreement.

Headnote:
Insurance - Export Factoring Agreement - Clause 1.1(15), Clause 3.1, Clause 7.1.1, Clause 9, Clause 13.1 - The court discussed the insured perils, factoring charges, and the definition of approved receivables under the Export Factoring Agreement. The court emphasized that insurance cover cannot be provided for risks that have already materialized and that valid insurance requires immediate notification and payment of factoring charges. The court also highlighted that only approved receivables are covered under the agreement and that the recall of the shipment by the complainant did not constitute contract repudiation, thus not falling under the insured perils.
Fact of the Case:

The complainant obtained a Whole Turnover Standard Policy from Export Credit Corporation (India) Ltd and shipped 9 containers to the buyer. The buyer refused to accept the shipment due to a previous dispute, leading the complainant to recall the consignment. The complainant filed a complaint seeking compensation and interest from the OPs.
Finding of the Court:

The court found that the dispute between the complainant and its buyer was not the fault of the OPs, and the recall of the shipment did not constitute contract repudiation under the insured perils. Therefore, the court dismissed the revision petition of the complainant.
Issues: The issues revolved around the validity of the insurance cover under the Export Factoring Agreement, the definition of approved receivables, and whether the actions of the complainant constituted contract repudiation.
Ratio Decidendi: The court held that insurance cover cannot be provided for risks that have already materialized, and only approved receivables are covered under the agreement. The recall of the shipment by the complainant did not constitute contract repudiation under the insured perils.
Final Decision: The court dismissed the revision petition of the complainant, stating that the complainant had no valid claim against the OPs.

ORDER

Mr. Justice J.M. Malik, Presiding Member -Both the Fora below have dismissed the complaint filed by the petitioner/complainant. Aggrieved by that order, the petitioner has filed the present revision petition.

2. Delay of 15 days in filing the Revision Petition is condoned.

3. We have heard the Counsel for the petitioner, at length. The facts germane to this case are these. M/s. Chaman Lal Setia Exports Ltd., the complainant in this case, obtained Whole Turnover Standard Policy from Export Credit Corporation (India) Ltd, OP1 on 3.9.2002. The complainant paid a sum of Rs. 10,000 and the same was renewed vide fresh agreement dated 22.12.2004. The complainant company shipped 9 containers under the Contract vide its Invoice Nos. 4408, 4409 and 4431. The non-negotiable set of documents was sent to the Buyer vide letter dated 10.4.2005, but before the filing of the complete set of documents with the Punjab National Bank, IBB, Amritsar, the petitioner received a mail dated 11.4.2005, from the Buyer, which reads as under:

"Monday, April 11, 2005 4.00 p.m.

Sub : Re. Attn. Mr. Setia

Dear Rajeev,

You should reconsider the way you are handling this matter.

We are not going to accept the documents of the 9 containers until you have solved the problem. All the losses will be charged to you and you are concerned about the SGS Charges ! !

I hope we can avoid a heavy Court case, so reconsider and then act.

Best regards

Masoud Pajouh."

This is an indisputable fact and its admission comes out from the horse's mouth itself (the complainant), that the said mail was sent due to the reason that some rice, shipped earlier, gave an awful smell. That was a dispute between the Buyer and the complainant, in respect of some previous transaction. On receipt of mail dated 11.4.2005, the petitioner itself recalled the consignment of 9 containers back from transit on 12.4.2005 while the said containers were in transit at Singapore. It must be borne in mind that the recall order was given by the petitioner itself. It is clear that the Buyer had refused to accept the second consignment.

4. The case of the complainant is that repudiation of contract by the Buyer is between the "insured perils" under the Factoring Agreement which the OPs failed to pay the same. Consequently, the complaint was filed before the District Forum, with the following prayers:

"(i) A sum of Rs. 18,26,881 on account of freight and shipment expenses for dispatch and calling back the shipment from transit at Singapore.

(ii) A sum of Rs. 50,000 on account of compensation due to all the mental agony and harassment caused by the OPs to the complainant.

(iii) Interest @ 18% p.a. on the amounts awarded to the complainant against the OPs.

(iv) Full costs of the proceedings.

(v) Any other relief to which the complainant is found and entitled under law and equity."

5. Counsel for the petitioner vehemently argued that this case is clearly covered within the insured perils, laid down in the contract. The attention of this Commission was invited towards the Export Factoring Agreement. The emphasis was laid on Clause 1.1(14) Factoring Charge, Clause 1.1(15) Insured Perils, Clause 3.1, Clause 7.1.1, Clause 9, Clause 13.1 and other clauses.

6. All these arguments are lame of strength. The following observations made by the State Commission are important:

"20. . Receiving a factoring return and cheque does not amount to acceptance of the same. The encashment of the cheque was done in a routine manner since different people are placed for different jobs. However, at the time of adjustment, it was found that since the notification was submitted after the loss had occurred, the factoring charges were returned vide letter dated 3.6.2005. As per principle of Law of Insurance, there cannot be insurance of the risk that has already materialized. Clause 3.1 of the Factoring Agreement provides for immediate notification together with payment of factoring charges as applicability of insurance cover starts from the date of shipment

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Insurance cover cannot be provided for risks that have already materialized, and only approved receivables are covered under the Export Factoring Agreement.

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