Case: SUSHILABEN INDRAVADAN GANDHI &amp; ANR.  Vs. THE NEW INDIA ASSURANCE COMPANY LIMITED &amp; ORS.

Investment Corpn. of Orissa Ltd. v. New India Assurance Co. Ltd. (2016) 15 SCC 315 , this Court referred to the contra proferentum rule as follows: 10. We proceed to deal with the submission made by the counsel for the appellant regarding the rule of contra proferentem. The Common Law rule of construction verba chartarum fortius accipiuntur contra proferentem means that ambiguity in the wording of the policy is to be resolved against the party who prepared it. MacGillivray on Insurance Law [ Legh-Jones, Longmore et al (Eds.), MacGillivray on Insurance Law (9th Edn., Sweet and Maxwell, London 1997) at p. 280.] deals with the rule of contra proferentem as follows: The contra proferentem rule of construction arises only where there is a wording employed by those drafting the clause which leaves the court unable to decide by ordinary principles of interpretation which of two meanings is the right one. One must not use the rule to create the ambiguity — one must find the ambiguity first. The words should receive their ordinary and natural meaning unless that is displaced by a real ambiguity either appearing on the face of the policy or, possibly, by extrinsic evidence of surrounding circumstances. (footnotes omitted) 11.Colinvauxs Law of Insurance [ Robert and Merkin (Eds.), Colinvauxs Law of Insurance (6th Edn., 1990) at p. 42.] propounds the contra proferentem rule as under: Quite apart from contradictory clauses in policies, ambiguities are common in them and it is often very uncertain what the parties to them mean. In such cases the rule is that the policy, being drafted in language chosen by the insurers, must be taken most strongly against them. It is construed contra proferentem, against those who offer it. In a doubtful case the turn of the scale ought to be given against the speaker, because he has not clearly and fully expressed himself. Nothing is easier than for the insurers to express themselves in plain terms. The assured cannot put his own meaning upon a policy, but, where it is ambiguous, it is to be construed in the sense in which he might reasonably have understood it. If the insurers wish to escape liability under given circumstances, they must use words admitting of no possible doubt. But a clause is only to be contra proferentem in cases of real ambiguity. One must not use the rule to create an ambiguity. One must find the ambiguity first. Even where a clause by itself is ambiguous if, by looking at the whole policy, its meaning becomes clear, there is no room for the application of the doctrine. So also where if one meaning is given to a clause, the rest of the policy becomes clear, the policy should be construed accordingly.(footnotes omitted) 34. The High Court held in the impugned judgment that as additional premium had been paid so as to attract the applicability of IMT-5, in any case the Insurance Company would be liable under the policy to pay compensation in the case of death to unnamed passengers other than the insured and his paid driver or cleaner, Dr. Alpesh Gandhi being one such unnamed passenger. This was done on the footing that the exception to IMT-5 was that a person in the employ of the insured coming within the scope of the Workmens Compensation Act, 1923 is excluded from the cover, but that as Dr. Alpesh Gandhi did not come within the scope of the Workmens Compensation Act, compensation payable due to his death in a motor accident would be covered by IMT-5. We see no reason to disturb this finding. The inapplicability of endorsement IMT-16, as additional premium had not been paid would, therefore, make no difference on the facts of this case. Section-II, entitled liability to third parties in the insurance policy dated 17.04.1997 set out hereinabove exempts the insurance company from the death of a person carried in a motor car where such death arises out of and in the course of the employment of such person by the insurer. The question that arises before us is as to whether the expression employment is to be construed widely or narrowly – if widely construed, a person may be said to employed by an employer even if he is not a regular employee of the employer. However, the wider meaning that has been canvassed for by the insurance company cannot possibly be given, given the language immediately before, namely, in the course of, thereby indicating that the employment can only be that of a person regularly employed by the employer. Even otherwise, assuming that there is an ambiguity or doubt, the contra proferentum rule referred to hereinabove, must be applied, thus making it clear that such employment refers only to regular employees of the Institute, which, as we have seen hereinabove, Dr. Alpesh Gandhi was certainly not. 35. The Appellants placed reliance on an Order of this Court dated 05.03.2019, which reads as follows: 1. Leave granted. 2. The limited question to be examined arising from the impugned order is the effect of the direction that the insurance company is liable to pay only a sum of Rs.25,000/- and the balance amount may be recovered from the respondent No.2. 3. The appellant(s)/claimant(s) seeks to contend that it is impossible for the appellants to enforce their remedy specially giving their economic status. 4. On the conspectus of the matter and on hearing learned counsel for the parties, we consider it appropriate to direct that full amount should be paid by respondent No.1-Insurance Company and the amount beyond the liability to be paid by respondent No.1 may be recovered by the Insurance company from respondent No.2. 5. The appeal accordingly stands disposed of. Parties to bear their own costs. This Order seems to have been passed under Article 142 of the Constitution on the facts of that case, without reference to any case law. In the view that we have taken, it is unnecessary for us to place reliance on such Order.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]24. A conspectus of all the aforesaid judgments would show that in a society which has moved away from being a simple agrarian society to a complex modern society in the computer age, the earlier simple test of control, whether or not actually exercised, has now yielded more complex tests in order to decide complex matters which would have factors both for and against the contract being a contract of service as against a contract for service. The early control of the employer test in the sense of controlling not just the work that is given but the manner in which it is to be done obviously breaks down when it comes to professionals who may be employed25. Given the fact that this balancing process may often not yield a clear result in hybrid situations, the context in which a finding is to be made assumes great importance. Thus, if the context is one of a beneficial legislation being applied to weaker sections of society, the balance tilts in favour of declaring the contract to be one of service, as was done in Dharangadhara (supra), Birdhichand (supra), D.C.Dewan (supra), Silver Jubilee (supra), Hussainbhai (supra), Shining Tailors (supra), P.M. Patel (supra), and Indian Banks (supra). On the other hand, where the context is that of legislation other than beneficial legislation or only in the realm of contract, and the context of that legislation or contract would point in the direction of the relationship being a contract for service then, other things being equal, the context may then tilt the balance in favour of the contract being construed to be one which is for service26. Looked at in this light, let us now examine the agreement between Dr. Alpesh Gandhi and the Respondent No. 3. The factors which would lead to the contract being one for service may be enumerated as follows:(i) The heading of the contract itself states that it is a contract for service(ii) The designation of Dr. Gandhi is an Honorary Ophthalmic Surgeon(iii) INR 4000 per month is declared to be honorarium as opposed to salary(iv) In addition to INR 4000 per month, Dr. Gandhi is paid a percentage of the earnings of the Respondent No. 3 from out of the OPD, Operation Fee component of Hospitalization Bills, and Room Visiting Fees(v) The arbitration clause which speaks of disputes arising in the course of the tenure of this contract will be referred to the Managing Committee of the Institute, the decision of the Managing Committee being final, is also a clause which is unusual in a pure master-servant relationship(vi) The fact that the appointment is contractual – for 3 years – and extendable only by mutual consent, is another pointer to the fact that the contract is for service, which is tenure based(vii) The fact that termination of the contract can be by notice on either side would again show that the parties are dealing with each other more as equals than as master-servant(viii) Clause XI of the agreement also makes it clear that the earlier appointment that was made of Dr. Gandhi would cease the moment this contract comes into existence, Dr. Gandhi no longer remaining as a regular employee of the Institute27. As against the aforesaid factors which would point to the contract the contract being a contract for service, the following factors would point in the opposite direction:(i) The employment is full-time. Dr. Gandhi can do no other work, and apart from the seven types of work that Dr. Gandhi is to perform under Clause IV, any other assignment that may get created in the course of time may also be assigned to him at the employers discretion(ii) Dr. Gandhi is to work on all days except weekly offs and holidays that are given to him by the employer. However, what is important is that though governed by the leave rules of the Institute as in vogue from time to time, Dr. Gandhi will not be entitled to any financial benefit of any kind as may be applicable to other regular employees of the Institute under Clause V(iii) Dr. Gandhi will be governed by the Conduct Rules of the Institute as invoked from time to time and as applicable to regular employees of the Institute(iv) That in the event of a proven case of indiscipline or breach of trust, the Institute reserves a right to terminate the contract at any time without giving any compensation whatsoever28. If the aforesaid factors are weighed in the scales, it is clear that the factors which make the contract one for service outweigh the factors which would point in the opposite direction. First and foremost, the intention of the parties is to be gathered from the terms of the contract. The terms of the contract make it clear that the contract is one for service, and that with effect from the date on which the contract begins, Dr. Gandhi shall no longer remain as a regular employee of the Institute, making it clear that his services are now no longer as a regular employee but as an independent professional. Secondly, the remuneration is described as honorarium, and consistent with the position that Dr. Gandhi is an independent professional working in the Institute in his own right, he gets a share of the spoils as has been pointed out hereinabove. Thirdly, he enters into the agreement on equal terms as the agreement is for three years, extendable only by mutual consent of both the parties. Fourthly, his services cannot be terminated in the usual manner of the other regular employees of the Institute but are terminable on either side by notice. The fact that Dr. Gandhi will devote full-time attention to the Institute is the obverse side of piece-rated work which, as has been held in some of the judgments hereinabove, can yet amount to contracts of service, being a neutral factor. Likewise, the fact that Dr. Gandhi must devote his entire attention to the Institute would not necessarily lead to the conclusion that de hors all other factors the contract is one of service. Equally important is the fact that it is necessary to state Dr. Gandhi will be governed by the Conduct Rules and by the Leave Rules of the Institute, but by no other Rules. And even though the Leave Rules apply to Dr. Gandhi, since he is not a regular employee, he is not entitled to any financial benefit as might be applicable to other regular employees. Equally, arbitration of disputes between Dr. Gandhi and the Institute being referred to the Managing Committee of the Institute would show that they have entered into the contract not as master and servant but as employer and independent professional. A conspectus of all the above would certainly lead to the conclusion, applying the economic reality test, that the contract entered into between the parties is one between an Institute and an independent professional29. Even otherwise, it is well-settled that exemption of liability clauses in insurance contracts are to be construed in the case of ambiguity contra proferentum34. The High Court held in the impugned judgment that as additional premium had been paid so as to attract the applicability of IMT-5, in any case the Insurance Company would be liable under the policy to pay compensation in the case of death to unnamed passengers other than the insured and his paid driver or cleaner, Dr. Alpesh Gandhi being one such unnamed passenger. This was done on the footing that the exception to IMT-5 was that a person in the employ of the insured coming within the scope of the Workmens Compensation Act, 1923 is excluded from the cover, but that as Dr. Alpesh Gandhi did not come within the scope of the Workmens Compensation Act, compensation payable due to his death in a motor accident would be covered by IMT-5. We see no reason to disturb this finding. The inapplicability of endorsement IMT-16, as additional premium had not been paid would, therefore, make no difference on the facts of this case. Section-II, entitled liability to third parties in the insurance policy dated 17.04.1997 set out hereinabove exempts the insurance company from the death of a person carried in a motor car where such death arises out of and in the course of the employment of such person by the insurer. The question that arises before us is as to whether the expression employment is to be construed widely or narrowly – if widely construed, a person may be said to employed by an employer even if he is not a regular employee of the employer. However, the wider meaning that has been canvassed for by the insurance company cannot possibly be given, given the language immediately before, namely, in the course of, thereby indicating that the employment can only be that of a person regularly employed by the employer. Even otherwise, assuming that there is an ambiguity or doubt, the contra proferentum rule referred to hereinabove, must be applied, thus making it clear that such employment refers only to regular employees of the Institute, which, as we have seen hereinabove, Dr. Alpesh Gandhi was certainly notThis Order seems to have been passed under Article 142 of the Constitution on the facts of that case, without reference to any case law. In the view that we have taken, it is unnecessary for us to place reliance on such Order.