UNITED INDIA INSURANCE CO. LTD. versus MIS ORIENT TREASURES PVT. LTD.
[2016] 1 S.C.R. 1, Supreme Court of India, 2016
Outcome: Disposed off
Segment: Ratio
[2016] l S.C.R. I 
UNITED INDIA INSURANCE CO. LTD. 
v. 
MIS ORIENT TREASURES PVT. LTD. 
(Civil Appeal No. 2140 of 2007 etc.) 
A 
JANUARY 13, 2016 
B 
[J. CHELAMESWAR AND ABBAY MANOHAR SAPRE, JJ.] 
Insurance - Contract of insurance - Between insurance 
company and the insured company - Insurance of the jewellery in 
the shop of the insured - Burglary in the shop - Claim for 
C 
compensation - Denial of, on the ground that the stolen articles· 
were not covered under the insurance policy - Complaint before 
National Consumer Disputes Redressal Commission - Commission 
partly allowing the petition directed insurance company to pay a 
sum of Rs.36,I0,2111- with interest @IO% p.a. - Insurance company 
as well as insured filed appeal - Held: In view of the notes appended 
D 
to the clauses 4 and 5 of the Proposal Form r!w clause 12 of the 
insurance policy, the insurance company cannot be held liable to 
indemnify the loss of the insured, as the articles were not covered 
under the policy. ' 
Interpretation of Statutes: 
Rule of interpretation - When words of a statute are clear. 
plain or unambiguous i.e. susceptible to only one meaning, the courts 
are bound to give effect to that meaning, irrespective of 
consequences. 
Rule of interpretation - A Note appended to main section, 
explanatory in nature, to the main section, has to be read in the 
context of the main section - This analogy applies while interpreting 
the words used in a contract - Contract. 
Principle - Principle
of contra proferentem - Applicability of 
E 
F 
- Discussed. 
G 
Allowing the appeal of the insurance company and 
dismissing that of the insured, the Court 
HELD: 1.1 The Note appended to clause 4 of the Pro;>osal 
Form would go to show that the appellant (Insurance Company)
2 
A 
B 
c 
D 
E 
F 
SUPREME COURT REPORTS 
[2016] 1 S.C.R. 
had made it clear in the Proposal Form itself that "window display 
of articles at night is not covered". This clearly meant that the 
insurance coverage was given to the articles kept in "window 
display during day time in business hours". Therefore, the insured 
was not entitled to claim any compensation for the loss of any 
such stolen articles. The insurance coverage was not extended 
to such stolen articles under the policy. [Paras 34 and 35] [13-B, 
D-E] 
1.2 Similarly, the Note appended to clause 5 would go to 
show that the appellant had made it clear in the Proposal Form 
itself to the respondent that "stock which is kept out of the safe 
after business hours at night" is not covered under the policy. 
This clearly meant that "stock kept out of safe during business 
hours", if stolen, was insured and given coverage under the policy 
but if it was kept out of safe after business hours at night, then it 
was not covered under the policy and therefore, the appellant 
was not liable to indemnify the loss sustained by the respondent 
of any such stolen articles. Thus, the respondent was not entitled 
to claim any compensation for the loss sustained in the burglary 
of any such stolen articles. [Paras 36 and 37] [13-E-F; 14-A] 
1.3 Since the burglary took place in the respondent's shop 
during night hours, the jewellery (gold/silver ornaments) kept in 
display window and jewellery lying out of safe, the
insurance 
company was justified in contending that the stolen articles were 
not covered under the policy by virtue of clauses 4, 5 of Proposal 
Form and Clause 12 of the policy and no liability could be fastened 
on them to indemnify the loss of such articles for awarding any 
compensation to the respondent. Indeed clauses 4, 5 and 12 were 
clearly attracted in appellant's favour. [Para 43] [15-F-G] 
1.4 There is neither any ambiguity nor vagueness and nor 
absurdity in the language/wording of the Note appended to clauses 
4 or/and 5 in the Proposal Fom. That apart clause 12 of the policy, 
G in clear terms, provides that the appellant would not be liable to 
indemnify any loss under the policy if such loss or damage to the 
insured property occurs while the insured property was kept in 
window display at night or while it was kept out of safe after 
business hours. [Para 38] [14-A-C] 
H 
1.5 The contra proferentem rule has no application to the
UNITED INDIA INSURANCE CO. LTD. v. MIS ORIENT 
TREASURES PVT. LTD. 
facts of the present case. It is for the reason because there is no 
ambiguity in the language/wording used in clauses 4 and 5 and 
the same carry only one meaning. Secondly, in the absence of any 
ambiguity, the respondent is not entitled to invoke the principle 
underlined in the rule of contra proferentem for interpreting the 
clauses of the policy and lastly, presence of ambiguity in the 
language of policy being sine qua non for invocation of the contra 
proferentem rule, which is not in the present case, the rule cannot 
be applied for deciding the issue involved in case. [Para 41] [15-
B-C] 
3 
A 
B 
1.6 A contract of insurance is one of the species of 
commercial transaction between the insurer and insured. It is 
C 
for the parties (insurer/insured) to decide as to what type of 
insurance they intend to do to secure safety of the goods and 
how much premium the insured wish to pay to secure insurance 
of their goods as provided in the tariff. If the insured pays 
additional premium to the insurer to secure more safety and D 
coverage of their insured goods, it is permissible for them to do 
so. In the present case, the respondent did not pay any additional 
premium to get the coverage of even two instances to avoid rigour 
of Note of clauses 4, 5 and clause 12. [Para 50] [16-H; 17-A-B] 
General Assurance Society Ltd. vs. Chandumull Jain & 
E 
Anr. AIR 1966 SC 1644 : 1966 SCR 500 - followed. 
United
India Insurance Co. Ltd. vs. Harchand Rai 
Chandan Lal 2004 (4) Suppl. SCR 662: (2004) 8 
SCC 644; Oriental Insurance Co. Ltd. vs. Sony Cheriyan 
1999 (1) Suppl. SCR 622:(1999) 6 SCC 451; Rahee 
p 
Industries Ltd. 
vs. 
Export 
Credit 
Guarantee 
Corporation of India Ltd. & Anr. 2008 (14) SCR 556: 
(2009) 1 SCC 138; Sikka Papers Ltd. vs. National 
Insurance Co. Ltd. & 
Ors. (2009) 7 SCC 777; 
Vikram Greentech India Ltd. & Anr. vs. New India 
Assurance Co. Ltd. 2009 (5) SCR 437:(2009) 5 SCC 
G 
599;New India Assurance Co. Ltd. vs. Zuari Industries 
Ltd. & Ors. (2009) 9 SCC 70; Amravati 
District 
Central Cooperative Bank Ltd. vs. United India Fire 
and General Insurance Co. Ltd. 2010 (4) SCR661; 
(2010) 5 SCC 294; Suraj Mal Ram Niwas Oil Mills P. 
H
4 
A 
B 
SUPREME COURT REPORTS 
[2016] I S.C.R. 
Ltd. vs. United India Insurance Co. Ltd. & Anr. 2010 
(13) SCR 138:(2010) 10 SCC 567; Deokar Exports P. 
Ltd. vs. New India Assurance Co. Ltd.2008 (14) 
SCR 1:(2008) 14 SCC 598; Export Credit Guarantee 
Corp. of India Ltd. vs. Garg Sons International 2013 
(1) SCR 336: (2014) 1 SCC 686 - referred to. 
Rust vs. Abbey Life Assurance Co. Ltd. & Anr. (1979) 
Vol.2 Lloyd's Law Reports 334 - referred to. 
2.1 It is a settled rule of interpretation that when the words 
of a statute are clear, plain or unambiguous, i.e., they are 
c 
reasonably susceptible to only one meaning, the courts are bound 
to give effect to that meaning irrespective of consequences. [Para 
42] [15-D] 
2.2 Equally well-settled rule of interpretation is that 
whenever the NOTE is appended to the main Section, it is 
D 
explanatory in nature to the maiu Section and explains the true 
meaning of the main Section, it has to be read in the context of 
main Section. This analogy equally applies while interpreting the 
words used in any contract. [Para 42] [15-E] 
G.P. Singh - Principle of Statutory Interpretation 13th 
E 
Edition - referred to. 
Case Law Reference 
2004 (4) Suppl. SCR 662 
referred to. 
Para 22 
1999 (1) Suppl. SCR 622 
referred to. 
Para 22 
2008 (14) SCR 556 
referred to. 
Para 22 
F 
(2009) 7 sec 111 
referred to. 
Para 22 
2009 (5) SCR 437 
referred to. 
Para 22 
(2009) 9 sec 10 
referred to. 
Para 22 
2010 (4) SCR661 
referred to. 
Para 22
2010 (13) SCR 138 
referred to. 
Para 22 
(2010) 10 sec 567 
referred to. 
Para 22 
2008 (14) SCR 1 
referred to. 
Para 22 
G 
2013 (1) SCR 336 
referred to. 
Para 22 
1966 SCR 500 
followed 
Para 30 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2140 
H 
of2007.
UNITED INDIA INSURANCE CO. LTD. v. MIS ORIENT 
5 
TREASURES PVT. LTD. 
From the Judgment and Order dated 19.03.2007 of the National 
A 
Consumer Disputes Redressal Commission, New Delhi in Original 
Petition No. 375 of 1999. 
WITH 
C. A. No. 5141of2007 
P. P. Malhotra, Huzefa Ahmadi, Vineet Malhotra, Shailendra 
Sharma, Yasir Rauf, V. D. Khanna, Manoj V. George, Siju Thomas, 
Shilpa M. George, Rohit Adlakha, Mohd. Irshad Hanif for the Appellant. 
Naresh Bakshi for the Respondent. 
The Judgment of the Court was delivered by 
ABHAY MANOHAR SAPRE, J. 
C. A. No. 2140 of 2007 
B 
c 
I. This appeal under Section 23 of the Consumer Protection Act, 
1986 is filed against the order dated 19 .03 .2007 of the National Consumer 
D 
Disputes Redressal Commission (hereinafter referred to as "the 
Commission"), New Delhi in Original Petition No. 375 of 1999 whereby 
the Commission allowed the petition filed by the respondent herein and 
directed the appellant-insurance company to pay a sum ofRs.36,10,211/ 
- with interest @10% p.a. from 03.12.1995 till date of payment and also 
directed the insurance company to pay costs assessed at Rs.50,000/- to 
E 
the respondent-Complainant herein. 
2. In order to appreciate the issue involved in this appeal, which 
lies in a narrow compass, it is necessary to set out the relevant facts in 
brief infra. 
3. The appellant herein is an insurance company incorporated 
under the Companies Act having its registered office at No. 24, Whites 
Road, Chennai.
The respondent herein is also a company incorporated 
under the Companies Act, 1956 having its registered office at Oceanic 
Buildings, Quilon, Kerala and its branches inter alia at Janpriya Centre 
No.34, SirThyagaraya Road, Pondy Bazar, Chennai. 
4. The respondent herein is the complainant. They are engaged in 
the business of sale of various kinds of Jewellery. The respondent is 
having their jewellery shop known as "Kanchana Mahal" which is 
situated at Janpriya Centre No.34, Sir Thyagaraya Road, Pondy Bazar, 
Chennai. 
F 
G 
H
6 
A 
B 
c 
D 
E 
F 
G 
H 
SUPREME COURT REPORTS 
[2016] l S.C.R. 
5. The respondent had insured their jewellery kept in their shop 
with the appellant under successive "Jewellers Block Policies" with effect 
from 02.07. l 993 onwards. The procedure followed was that the 
respondent was required to submit proposal form. On receipt of the 
proposal form, the officials of the appellant-insurance company used to 
inspect the shop to verify the security and storage particulars. 
6. The respondent filled up the insurance proposal form by providing 
necessary information as mentioned in the form. On the basis of the said 
proposal form, the appellant issued an insurance policy in favour of the 
respondent from 02.07.1993 to 01.07.1994. It was then subsequently 
renewed for further one year, i.e. from 02.07.1994 to 01.07.1995. 
7. On 02.06.1995, the respondent alleged that there was a burglary 
in their Jewellery shop. According to the respondent, on the night of 
02.06.1995, burglars broke open the locks of shutters, entered the shop 
and decamped with the gold and silver ornaments valued at 
Rs.40,63,735.53. The respondent accordingly lodged FIR at the concerned 
Police Station on 03.06.1995. The respondent also informed the appellant 
on 03.06.1995 by a telegraphic communication about this incident. By 
letter dated 05.06.1995, the appellant informed the respondent that a 
Surveyor has been appointed to assess the loss suffered by the respondent 
in the burglary. The surveyor
then inspected the site and also examined 
all the relevant material, books, inventory etc. with a view to assess the 
actual loss alleged to have been suffered by the respondent and 
accordingly assessed the total loss at Rs.36, 10,211/. Thereafter he 
submitted his report. After investigation, the police also submitted a final 
investigation report on 24.06.1995 treating the case as untraceable. 
8. The respondent then submitted their claim with the appellant 
on the basis of the Insurance Policy and claimed that they are entitled to 
receive the value of Jewellery which they lost in burglary committed in 
their shop on 02.06.1995. On 19.01.1998, the Divisional Managerofthe 
Insurance Company, Tuticorin after examining the respondent's claim 
for loss of their Jewellery repudiated the claim inter alia on the ground 
that the stolen gold ornaments and silver articles were found to had been 
kept on display window and in the sales counters at the time of burglary 
which took place in the night of 02.06.1995, which according to appellant, 
was contrary to the terms of the policy and, therefore, not covered in the 
policy. In other words, such items were not insured. It was further stated 
that the policy was issued subject to the terms, conditions, warranties
UNITED INDIA INSURANCE CO. LTD. v. MIS ORIENT 
TREASURES PVT. LTD. [ABHAY MANOHAR SAPRE, J.] 
and exclusion printed in the proposal form which was a part of policy. 
The appellant relied on clause 12 of the policy and stated that since the 
burglary in the shop took place during night and stolen articles kept in 
window display and lying out of safe in the shop were stolen, the appellant 
could not be made liable to indemnify such loss which, according to 
them, was not insured and specifically excluded from the insurance policy. 
9. Being aggrieved by the decision of the appellant-Insurance 
Company, the Respondent sent letters and reminders pointing out therein 
the terms of the proposal form and policy and insisted that the loss was 
fully covered by the policy and hence they were entitled to claim the 
value of the lost articles from the appellant on the basis of Insurance 
Policy. As nothing was done, the respondent filed a complaint before 
the National Consumer Disputes Redressal Commission, New Delhi 
(hereinafter referred to as "the Commission") being Original Petition 
No. 375of1999 claiming a sum ofRs.1,32,06,786.30. 
7 
A 
B 
c 
10. By order dated 19.03.2007, the Commission partly allowed 
the petition filed by the respondent and directed the appellant-Insurance 
D 
Company to pay a sum of Rs.36,10,211/- with interest@ 10% p.a. from 
03.12.1995 till date of payment and also directed the Insurance Company 
to pay costs assessed at Rs.50,000/- to the respondent.
11. Aggrieved by the said order, the appellant-Insurance Company 
has filed this appeal. 
12. Dissatisfied with the claim awarded by the Commission, the 
respondent has filed C.A. No. 5141 of 2007 seeking enhancement in 
the quantum of claim. According to the respondent, they are entitled to 
claim a sum ofRs.1,32,06,786.30 as against Rs. 36,10,211/- awarded by 
the Commission. 
13. Heard Mr. P.P. Malhotra, learned senior counsel for the appellant 
and Mr. H. Ahmadi, learned senior counsel for the respondent. 
14. Shri P.P.Malhotra, learned senior counsel appearing for the 
appellant while assailing the legality and correctness of the impugned 
order mainly urged two points in support of his submissions. 
E 
F 
G 
15. In the first place, learned senior counsel urged that the 
Commission erred in partly allowing the complaint filed by the respondent 
herein by passing the impugned award against the appellant. According 
to learned counsel, had the Commission properly interpreted clauses 4 
and 5 of the proposal form, which was part of the policy along with 
H
8 
A 
B 
c 
D 
E 
F 
SUPREME COURT REPORTS 
[2016] 1 S.C.R. 
clause 12 of the policy then in such event, the respondent's complaint 
was liable to be dismissed in its entirety. 
16. Elaborating the aforementioned submission, learned counsel 
pointed out that the plain reading of clauses 4 and 5 (b) with their note 
and clause 12 of the policy clearly show that the respondent's claim was 
excluded from the policy issued by the appellant because it was in relation 
to the items which were kept in display window and out of safe at the 
time of burglary. 
17. In other words, the submission was that the respondent's claim 
was not covered under the policy and was expressly excluded by virtue 
of clauses 4 and 5(b) read with clause 12 of the policy because firstly, 
the burglary in the shop took place in night hours and secondly, the stolen 
articles were kept in display window and outside the safe. 
18. Learned counsel, therefore, urged that due to these two 
admitted facts, the note appended to clauses 4 and 5 read with clause 12 
was attracted rendering the respondent's complaint as not maintainable. 
19. Learned counsel further pointed out that the respondent despite 
knowing these clauses of the proposal form/policy instead of seeking 
any clarification regarding meaning of the clauses paid the premium 
pursuant thereto the appellant issued the Insurance policy on the terms 
and conditions set out therein which are binding on both parties while 
adjudicating their rights
against each other arising out of the policy. 
20. Learned counsel, in the second place, submitted that the 
language of clauses 4, 5 and 12 being plain, clear and unambiguous 
conveying only one meaning, the appellant had every right to rely upon 
these clauses while opposing the respondent's complaint on merits. 
21. Learned counsel, therefore, submitted that in the light of these 
facts, the respondent had no right to file a complaint against the appellant 
seeking monetary compensation for the loss alleged to have been suffered 
by them arising out of burglary of their articles stolen from their shop. 
G 
Such claim, according to learned counsel, was barred by virtue of clauses 
4, 5 and 12 of the policy and was therefore, liable to be dismissed as 
being untenable. 
22. In support of his submission, learned counsel placed reliance 
on the decisions in General Assurance Society Ltd. vs. Chandumull 
Jain & Anr., AIR 1966 SC 1644 = (1966) 3 SCR 500, United India 
H 
Insurance Co. Ltd. vs. Harchand Rai Chandan Lal (2004) 8 SCC
UNITED INDIA INSURANCE CO. LTD. v. MIS ORIENT 
TREASURES PVT. LTD. [ABHAY MANOHAR SAPRE, J.] 
644, Oriental Insurance Co. Ltd. vs. Sony Cheriyan, (1999) 6 SCC 
451, Rahee Industries Ltd. vs. Export Credit Guarantee 
Corporation of India Ltd. & Anr., (2009) I SCC 138, Sikka Papers 
Ltd. vs. National Insurance Co. Ltd. & Ors., (2009) 7 SCC 777, 
Vikram Greentech India Ltd. & Anr. vs. New India Assurance 
Co. Ltd., (2009) 5 SCC 599, New India Assurance Co. Ltd. vs. 
Zuari Industries Ltd. & Ors., (2009) 9 SCC 70, Amravati District 
Central Cooperative Bank Ltd. vs. United India Fire and General 
Insurance Co. Ltd., (20 I 0) 5 SCC 294, Suraj Mal Ram Ni was Oil 
Mills P. Ltd. vs. United India Insurance Co. Ltd. & Anr., (2010) 
10 SCC 567, Deokar Exports P. Ltd. vs. New India Assurance Co. 
Ltd., (2008) 14 SCC 598, Export Credit Guarantee Corp. oflndia 
Ltd. vs. Garg Sons International, (2014) I SCC 686 and Rust vs. 
Abbey Life Assurance Co. Ltd. & Anr., (1979) Vol.2 Lloyd's Law 
Reports 3 34. 
23. In reply, Mr. H. Ahmadi, learned senior counsel appearing for 
9 
A 
B 
c 
the respondent while supporting the 
impugned order contended that 
D 
the issue involved in this case needs to be decided in the light of the 
principle underlined in the rule known as "contra proferentem rule". 
According to learned counsel, there is an ambiguity in the language/ 
words of clauses 4 and 5 of the proposal form and since the ambiguity 
noticed created some confusion as to what these clauses
actually provide 
and expect the respondent to comply at the time of filling the proposal 
form for obtaining the insurance policy, this Court should interpret the 
clauses by applying the principle underlined in the aforesaid rule in such 
a way that its benefit would go to the respondent rather than to the 
appellant. It was also his submission that the appellant being the author 
of the proposal and policy are not entitled to claim the benefit of the 
clauses of proposal form/policy in their favour thereby defeating the 
rights of the respondent which they have got under the policy to enforce 
against the appellant for claiming the compensation. 
E 
F 
24. Learned counsel also contended that the respondent had 
intended to insure all their articles kept in the shop regardless of timings 
G 
and the manner in keeping the articles in their shop. He also pointed out 
that the respondent having paid the full premium for the articles which 
were valued at Rs. 2 crore as disclosed by the respondent in clauses 4 
and 5 and therefore the respondent was entitled to claim compensation 
for the loss of the stolen items (jewelry) treating them as insured and 
covered under the policy, issued in their favour. 
H
10 
A 
B 
c 
SUPREME COURT REPORTS 
[2016] l S.C.R. 
25. So far as the connected appeal filed by the respondent-
Complainant is concerned, the submission of the learned senior counsel 
for the respondent was that the Commission erred in not allowing their 
complaint in its entirety despite availability of evidence on record. Learned 
counsel, therefore, prayed for dismissal of the appellant's appeal and 
allowing the appeal filed by the respondent by enhancing the quantum of 
compensation as claimed by the respondent in the complaint. 
26. Learned senior counsel also placed reliance on the same 
decisions which were cited by learned senior counsel for the appellant 
and contended that the law laid down therein also supports the 
respondent's case. 
27. Having heard the learned counsel for the parties and on perusal 
of the record of the case including the written submissions, we find 
force in the submissions of learned counsel for the appellant (Insurance 
company- Insurer). 
o 
28. The question which arises for consideration in this appeal is 
whether the Commission was justified in allowing the complaint filed by 
the respondent against the appellant-Insurance Company in part and 
was, therefore, justified in awarding a sum of Rs.36,10,21J/- to the 
respondent. 
E 
29. In order to answer the aforementioned question, clauses 4, 5 
of the proposal form and clause 12 of the policy need mention infra. 
. 
(I) 
4 
WINDOW DISPl AY 
State the approximate value of any of arucle
of 
Jewellery or Gem stock which will be displayed 
F 
in the window (A pad or tray containing a 
number of rings or other articles to be counted 
Rs.3,50,500(}'-
as one article). 
(Give separate answer for each location). 
Note : Window display at niRht is not covered. 
5 
STOCK 
a. What was (i) the average daily total value of 
(a)(i)New Shop 
your stock during the past 12 months? 
(b)(iii)New shop 
G· 
(ii) Will the whole of your stock when on your 
(b) All stocks of 
premises be kept in safe at night and at all times 
Gold, Diamond. 
when the state value and class of stock which 
Gems.Silver and 
will left outside safes. 
other 
precious 
Note: We do not cover stocks kept out of the 
stones-kept 
safe--business hours at night. 
outside the safe -
Rs.2,00,00,000 
H 
(Two crores).
l UNITED INDIA INSURANCE CO. LTD. v. MIS ORIENT 
11 
~· TREASURES PVT. LTD. [ABHAY MANOHAR SAPRE, J.] 
• 
(2) 
The company shall not be liable for under 
this policy in respect of 
1to11. ........... . 
12. 
Loss or damage to property, insured 
whilst in window display at night or whilst kept 
out of safe after business hours." 
30. Before we examine the issue involved in the case, it is necessary 
to take note of the law laid down on the subject by the Constitution 
Bench of this Court in General Assurance Society Ltd. vs. 
Chandumull Jain & Anr., AIR 1966 SC 1644. 
A 
B 
c 
31. The Constitution Bench in this case has explained the true 
nature of contract relating to Insurance and laid down the relevant factors 
D 
which the courts should keep in mind while interpreting the contract of 
insurance. 
32. Justice Hidayatullah, J. (as His Lordship then was) speaking 
for the Bench in his distinctive style of writing held in Para 11 as under: 
"11. A contract of insurance is a species of commercial 
E 
transactions and there is a well established commercial 
practice to send cover notes even prior to the completion 
of a proper proposal or while the proposal is being 
considered or a policy is in preparation for delivery. A cover 
note is a temporary and limited agreement. It may be self 
·contained or it may incorporate by reference the terms and 
conditions of the future policy. When the cover note 
incorporates the policy in this manner, it does not have to 
recite the term
and conditions, but merely to refer to a 
.. , . particular standard policy. If the proposal is for a standard 
... 
.., 
policy and the cover note refers to it, the assured is taken 
_. 
to have accepted the terms of that policy. The reference to 
the policy and its terms and conditions may be expressed 
in the proposal or the cover note or even in the letter of 
acceptance including the cover note. The incorporation of 
F 
G 
the terms and conditions of the policy may also arise from a 
combination of references in two or more documents H
12 
A 
B 
c 
D 
E 
F 
G 
H 
SUPREME COURT REPORTS 
[2016] I S.C.R. 
passing between the parties. Documents like the proposal, 
cover note and the policy are commercial documents and 
to interpret them commercial habits and practice cannot 
altogether be ignored. During the time the cover note 
operates, the relations of the parties are governed by its 
terms and conditions, if any, but more usually by the terms 
and conditions of the policy bargained for and to be issued. 
When this happens the terms of the policy are incipient but 
after the period of temporary cover, the relations are 
governed only by the terms and conditions of the policy 
unless insurance is declined in the meantime. Delay in 
issuing the policy makes no difference. The relations even 
then are governed by the future policy if the cover notes 
give sufficient indication that it would be so. In other 
respects there is no difference between a contract of 
insurance and any other contract except that in a contract 
of insurance there is a requirement of uberrima fides i.e. 
good faith on the part of the assured and the contract is 
likely to be construed contra proferentem that is against 
the company in case of ambiguity or doubt. A contract is 
formed when there is an nnqualified acceptance of the 
proposal. Acceptance may be expressed in writing or it may 
even be implied if the insurer accepts the premium and 
retains it. In the case of the assured, a positive act on his 
part by which he recognises
or seeks to enforce the policy 
amounts to an affirmation of it. This position was clearly 
recognised by the assured himself, because he wrote, close 
upon the expiry of the time of the cover notes, that either a 
policy should be issued to him before that period had 
expired or the cover note extended in time. 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. Looking at the proposal, the 
letter of acceptance and the cover notes, it is clear that a 
contract of insurance under the standard policy for fire and 
extended to cover flood, cyclone etc. had come into being." 
33. Keeping in view the aforesaid principle of law in mind and
UNITED INDIA INSURANCE CO. LTD. v. MIS ORIENT 
13 
TREASURES PVT. LTD. [ABBAY MANOHAR SAPRE, J.] 
applying the same to the facts of the case, we proceed to examine the 
A 
issue involved in this appeal. 
34. Mere perusal of the note appended to clause 4 quoted above 
would go to show that the appellant (Insurance Company) had made it 
clear in the proposal form itself that "window display of articles at 
night is not covered". This clearly meant that the insurance coverage 
B 
was given to the articles kept in "window display during day time in 
business hours" whereas insurance coverage was not given to the articles 
when they were kept in "window display at night". 
35. In other words, if the burglary had been committed during day 
time in business hours and in that burglary, the articles kept in display c 
window were stolen then in such circumstances, the appellant was liable 
to reimburse the loss to the respondent of such stolen articles as insured 
articles under the policy. But if the burglary had been committed of the 
articles kept in display window during night time (after business hours) 
then in such circumstances the appellant having made it clear to the 
respondent in the note in clause 4 that they would not be liable to 
D 
indemnify the loss of any such articles kept in display window after 
business hours, the respondent was not entitled to claim any compensation 
for the loss of any such stolen articles. In other words, the insurance 
coverage was not
extended to such stolen articles under the policy. 
36. Similarly, mere perusal of note appended to clause 5 quoted 
above would go to show that the appellant had made it clear in the 
proposal form itself to the respondent that "stock which is kept out of 
the safe after business hours at night" is not covered under the 
policy. This clearly meant that "stock kept out of safe during business 
hours", if stolen, was insured and given coverage under the policy but if 
it was kept out of safe after business hours at night, then it was not 
covered under the policy and therefore, the appellant was not liable to 
indemnify the loss sustained by the respondent of any such stolen articles. 
37. In other words, ifthe burglary had been committed during day 
time in business hours then the appellant was liable to reimburse the loss 
to the respondent of the stolen articles treating them as insured articles 
under the policy. But if the burglary had been committed of the stock/ 
articles kept out of safe after business hours at night then in such 
circumstances the appellant was not liable to indemnify the loss of any 
such stolen articles by virtue of note appended to clause 5. In these 
circumstances, the respondent was not entitled to claim any compensation 
E 
F 
G 
H
14 
A 
B 
c 
D 
E 
F 
G 
H 
SUPREME COURT REPORTS 
[2016) I S.C.R. 
for the loss sustained in the burglary of any such stolen articles. 
38. In our considered opinion. there is neither any ambiguity nor 
vagueness and nor absurdity in the language/wording of note appended 
to clauses 4 or/and 5. On the other hand. we find that the language/ 
wording of the note in both the clauses is plain, clear, unambiguous and 
creates no confusion in the mind of the reader about its meaning. That 
apart clause 12 of the policy, in clear terms, provides that the appellant 
would not be liable to indemnify any loss under the policy if such loss or 
damage to the insured property occurs while the insured property was 
kept in window display at night or while it was kept out of safe after 
business hours. 
39. This takes us to the next submission of Mr. Ahmadi, learned 
senior counsel for the respondent that we should apply the rule of contra 
proferentum to interpret clauses 4 and 5 because according to him 
there is an ambiguity in the language/wording of clauses 4 and 5 and 
secondly, the appellant being the author of these clauses has no right to 
take benefit of the ambiguity to defeat the rights of the respondent. 
Learned counsel maintained that the interpretation of the clauses should, 
therefore, be made in such a way that its benefit would go to the 
respondent (insured) for claiming compensation from the appellants. We 
cannot accept this submission of learned counsel for the
respondent for 
more than one reason. 
40. In Halsbury's Laws of England (fifth edition- Volume 60 Para 
105) principle of contra proferentem rule is stated thus : 
"Contra proferentem rule. Where there is ambiguity in the 
policy the court will apply the contra proferentem rule. 
Where a policy is produced by the insurers, it is their 
business to see that precision and clarity are attained and, 
if they fail to do so, the ambiguity will be resolved by 
adopting the construction favourable to the insured. 
Similarly, as regards language which emanates from the 
insured, such as the language used in answer to questions 
in the proposal or in a slip, a construction favourable to the 
insurers will prevail ifthe insured has created any ambiguity. 
This rule, however, only becomes operative where the 
words are truly ambiguous; it is a rule for resolving 
ambiguity and it cannot be invoked with a view to creating 
a doubt. Therefore, where the words used are free from
UNITED INDIA INSURANCE CO. LTD. v. MIS ORIENT 
TREASURES PVT. LTD. [ABHAY MANOHAR SAPRE, J.] 
ambiguity in the sense that, fairly and reasonably construed, 
they admit of only one meaning, the rule has no application." 
41. The aforesaid rule, in our considered opinion, has no application 
to the facts of this case. It is for the reason that firstly, we find that there 
is no ambiguity in the language/wording used in clauses 4 and 5. In other 
words, as held above, the language/wording of clauses 4 and 5 and the 
note appended thereto is clear, plain and unambiguous and carries only 
one meaning. Secondly, in the absence of any ambiguity, the respondent 
is not entitled to invoke the principle underlined in the rule of contra 
proferentem for interpreting the clauses of the policy and lastly, presence 
of ambiguity in the language of policy being sine qua non for invocation 
of the contra proferentem rule, which is not present here, we cannot 
apply the rule for deciding the issue involved in case. 
42. It is a settled rule of interpretation that when the words of a 
statute are clear, plain or unambiguous, i.e., they are reasonably 
susceptible to only one meaning, the courts are bound to give effect to 
that meaning irrespective of consequences. In other words, when a 
language is plain and unambiguous and admits of only one meaning, no 
question of construction of a statue arises, for the Act speaks for itself. 
Equally well-settled rule of interpretation is that whenever
the NOTE is 
appended to the main Section, it is explanatory in nature to the main 
Section and explains the true meaning of the main Section and has to be 
read in the context of main Section (See - G P. Singh - Principle of 
Statutory Interpretation 13th Edition page 50 and 172). This 
analogy, in our considered opinion, equally applies while interpreting the 
words used in any contract. 
43. Coming now to the facts of the case, it is not in dispute that the 
burglary took place in the respondent's shop during night hours on 
02.06.1995 when the burglars took away the jewelry (gold/silver 
ornaments) kept in display window and jewelry lying out of safe. The 
appellant was, therefore, justified in contending that the stolen articles 
were not covered under the policy by virtue of clauses 4, 5 of Proposal 
Form and Clause 12 of the policy and no liability could be fastened on 
them to indemnify the loss of such articles for awarding any compensation 
to the respondent. Indeed clauses 4, 5 and 12 were clearly attracted in 
appellant's favour. 
44. We do not agree to the submission of Mr. Ahmadi, learned 
senior counsel for the respondent that once the respondent disclosed 
15 
A 
B 
c 
D 
E 
F 
G 
!-!
16 
A 
B 
c 
D 
E 
F 
SUPREME COURT REPORTS 
[2016] 1 S.C.R. 
their intention to get their stock (ornaments) valued at Rs 2 Crores insured 
with the appellant by filling the details in Columns 4 and 5 of the proposal 
form and once they paid the necessary premium to the appellant, the 
respondent became entitled to claim loss of the stolen items from the 
appellant treating the stolen items as insured under the policy regardless 
of note contained in clauses 4 , 5 and clause 12 of the policy. In our view, 
the submission has a fallacy. 
45. Firstly, as mentioned above, if the burglary had taken place 
during day time in business hours in respect of the items kept in display 
window or out of safe, the appellant was liable to compensate the 
respondent for the entire loss suffered by them treating the stolen items 
as insured items under the policy. In other words, if the burglary had 
taken place during business hours then item kept in display window or 
those lying out of safe were covered under the policy. 
46. Likewise, if the burglary had taken place during night in relation 
to the items kept in the safe, then also the appellant was liable to 
compensate the loss suffered by the respondent in burglary treating the 
stolen items as insured items under the policy. 
47. In both the category of cases mentioned above, the appellant 
was not entitled to rely upon clauses 4, 5 and 12 to avoid their liability 
because both the instances did not fall either in clause 4 or clause
5 or 
clause 12. However, this was not the case set up by the respondent 
against the appellant. 
48. On the other hand, it is the case of the respondent that the 
burglary took place at night and the insured items kept in display window 
and some lying out of safe were stolen. Due to these facts, clauses 4, 5 
and 12 were attracted against the respondent. 
49. In order to claim benefit of the policy, it was obligatory upon 
the respondent to have removed the insured items from display window 
everyday after business hours and keep them inside safe during night 
hours till opening of the shop next day. Like wise all insured items in side 
G 
the shop should also have been kept in side the safe everyday after 
business hours till opening of the shop next day. It was, however, not 
done by the respondent. 
50. A contract of insurance is one of the species of commercial 
transaction between the insurer and insured. It is for the parties (insurer/ 
H 
insured) to decide as to what type of insurance they intend to do to
UNITED INDIA INSURANCE CO. LTD. v. MIS ORIENT 
17 
TREASURES PVT. LTD. [ABHAY MANOHAR SAPRE, J.] 
secure safety of the goods and how much premium the insured wish to 
A 
pay to secure insurance of their goods as provided in the tariff. If the 
insured pays additional premium to the insurer to secure more safety 
and coverage of their insured goods, it is permissible for them to do so. 
In this case, the respondent did not pay any additional premium to get 
the coverage of even two instances mentioned above to avoid rigour of B 
note of clauses 4, 5 and clause 12. 
51. In view of foregoing discussion, we cannot concur with the 
reasoning and the conclusion arrived at by the Commission. The appeal 
filed by the insurance company, i.e., Civil Appeal No. 2140 of 2007, 
therefore, deserves to be allowed. It is accordingly allowed. Impugned 
order is set aside. As a consequence thereof, the complaint filed by the 
respondent against the appellant out of which this appeal arises is 
dismissed. No costs. 
Civil Appeal No. 5141 of 2007 
c 
In the light of the order passed in Civil Appeal No. 2140 of 2007, 
D 
it is not necessary to examine the merits of the claim filed by the 
Complainant, which has been rendered infructuous. The appeal thus 
fails and is dismissed as having rendered infructuous. No costs. 
Kalpana K. Tripathy 
Appeals disposed of. 
E