Case: M/S.Suraj Mal Ram Niwas Oil Mills (P)Ltd Vs. United India Insurance Co. Ltd.

had exceeded the policy limit. In support of his plea that it was not open to the insured to pick and choose the consignments for the purpose of declaration, learned Counsel relied on the decision of the Kings Bench in Dunlop Brothers & Company v. Townend, 1919 (2) KB 127. Learned Counsel contended that appellant had also violated the terms of policy by not informing the respondents immediately about the accident as well as not taking adequate steps to minimise the losses, inasmuch as the goods dispatched from Dharamnagar to Agartala were not properly packed. According to the learned Counsel, the insurance policy casts an obligation on the insured and its agents to take steps for minimizing losses, and the fact that the appellant permitted the carriage of oil in broken tins clearly establishes that the appellant had violated the terms of the policy and, therefore, the respondents cannot be made liable for the losses.21. Lastly, learned Counsel urged that there must be strict compliance with the terms and conditions of an insurance policy, and the appellant having breached a fundamental condition of the policy, the respondent is not liable to pay any amount to them. In support of the contention that in a contract of insurance, rights and obligations are strictly governed by the terms of the policy and no exception or relaxation can be given on the ground of equity, learned Counsel relied on the judgments of this Court in Deokar Exports Private Limited v. New India Assurance Company Limited, I (2009) CPJ 6 (SC)=I (2009) ACC 93 (SC)=(2008) 14 SCC 598 , United India Insurance Co. Ltd.v. Harchand Rai Chandan Lal, V (2004) SLT 876=IV (2004) CPJ 15 (SC)=(2004) 8 SCC 644and Vikram Greentech India Limited & Anr.v. New India Assurance Company Limited, IV (2009) SLT 35=II (2009) CPJ 34 (SC) =(2009) 5 SCC 599. 22. Before embarking on an examination of the correctness of the grounds of repudiation of the policy, it would be apposite to examine the nature of a contract of insurance. It is trite that in a contract of insurance, the rights and obligations are governed by the terms of the said contract. Therefore, the terms of a contract of insurance have to be strictly construed, and no exception can be made on the ground of equity. In General Assurance Society Ltd. (supra), a Constitution Bench of this Court had observed that: “In interpreting documents relating to a contract of insurance, the duty of the Court is to interpret the words in which the contract is expressed by the parties, because it is not for the Court to make a new contract, however reasonable, if the parties have not made it themselves." [See also: Oriental Insurance Co. Ltd. v. Sony Cheriyan, VI (1999) SLT 565=(1999) 6 SCC 451 ; Vikram Greentech (supra); Sikka Papers Limited v. National Insurance Company Limited & Ors., III (2009) CPJ 90 (SC)=(2009) 7 SCC 777 ; New India Assurance Company Limitedv. Zuari Industries Limited & Ors., IV (2009) ACC 390 (SC)=IV (2009) CPJ 19 (SC)=VII (2009) SLT 122=(2009) 9 SCC 70 ; Amravati District Central Cooperative Bank Limited v. United India Fire and General Insurance Company Limited, III (2010) SLT 232=(2010) 5 SCC 294.] 23. Similarly, in Harchand Rai Chandan Lals case (supra), this Court held that: ”The terms of the policy have to be construed as it is and we cannot add or subtract something. Howsoever liberally we may construe the policy but we cannot take liberalism to the extent of substituting the words which are not intended.” 24. Thus, it needs little emphasis that in construing the terms of a contract of insurance, the words used therein must be given paramount importance, and it is not open for the Court to add, delete or substitute any words. It is also well settled that since upon issuance of an insurance policy, the insurer undertakes to indemnify the loss suffered by the insured on account of risks covered by the policy, its terms have to be strictly construed to determine the extent of liability of the insurer. Therefore, the endeavour of the Court should always be to interpret the words in which the contract is expressed by the parties.25. Having considered the instant case on the touchstone of the aforenoted broad principles to be borne in mind while examining the claim of an insured, we are of the opinion that the claim of the appellant must fail on the short ground that there was a breach of the afore-extracted special condition incorporated in the cover note. The special condition viz. "each and every consignment" must be declared before dispatch of goods is clear and admits of no ambiguity. The appellant was obliged to declare "each and every consignment" before it left the appellants factory premises and there is nothing in the policy to suggest that the insured had the liberty to pick and choose the dispatches which they wanted to declare to the insurer, not even at the instance of the consignee, who otherwise is a stranger to the contract between the insurer and the insured. We have no hesitation in rejecting the plea of the appellant that they were required to declare only those dispatches in which they had an insurable interest. It bears repetition that notwithstanding any request by the consignee, the policy of insurance postulated declaration in respect of each and every dispatch by the appellant. Therefore, the fact that purchasers did not want an insurance cover on certain dispatches had no bearing on the obligation of the appellant to declare each and every dispatch under the policy. It is a settled proposition of law that a stranger cannot alter the legal obligations of parties to the contract.26. We are in complete agreement with the National Commission that there was a breach of the special condition in the cover note for the insurance policy on the part of the appellant and, therefore, the repudiation of the claim of the appellant by the respondents was justified.

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

Explanation:
1[ds]24. Thus, it needs little emphasis that in construing the terms of a contract of insurance, the words used therein must be given paramount importance, and it is not open for the Court to add, delete or substitute any words. It is also well settled that since upon issuance of an insurance policy, the insurer undertakes to indemnify the loss suffered by the insured on account of risks covered by the policy, its terms have to be strictly construed to determine the extent of liability of the insurer. Therefore, the endeavour of the Court should always be to interpret the words in which the contract is expressed by the parties.25. Having considered the instant case on the touchstone of the aforenoted broad principles to be borne in mind while examining the claim of an insured, we are of the opinion that the claim of the appellant must fail on the short ground that there was a breach of thespecial condition incorporated in the cover note. The special condition viz. "each and every consignment" must be declared before dispatch of goods is clear and admits of no ambiguity. The appellant was obliged to declare "each and every consignment" before it left the appellants factory premises and there is nothing in the policy to suggest that the insured had the liberty to pick and choose the dispatches which they wanted to declare to the insurer, not even at the instance of the consignee, who otherwise is a stranger to the contract between the insurer and the insured. We have no hesitation in rejecting the plea of the appellant that they were required to declare only those dispatches in which they had an insurable interest. It bears repetition that notwithstanding any request by the consignee, the policy of insurance postulated declaration in respect of each and every dispatch by the appellant. Therefore, the fact that purchasers did not want an insurance cover on certain dispatches had no bearing on the obligation of the appellant to declare each and every dispatch under the policy. It is a settled proposition of law that a stranger cannot alter the legal obligations of parties to the contract.26. We are in complete agreement with the National Commission that there was a breach of the special condition in the cover note for the insurance policy on the part of the appellant and, therefore, the repudiation of the claim of the appellant by the respondents was justified.