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Effect must be given to Words of Contract and Intent while interpreting an Insurance Contract: SC

SHREE AMBICA MEDICAL STORES & ORS   v. THE SURAT PEOPLE’S CO-OPERATIVE BANK LIMITED & ORS, Civil Appeal No 562 of 2020 (Arising out of SLP(C) No 4362 of 2016) – January 28, 2020.

CORAM: two judge bench comprising of Justice DR DHANANJAYA Y CHANDRACHUD and Justice AJAY RASTOGI.

According to the cash credit facility entered into between the appellants and the respondent bank, the appellants were under an obligation to insure he goods hypothecated to the bank. The claim of the appellants under the insurance cover of the goods hypothecated was repudiated by the respondent insurer. A consumer complaint was lodged by the appellants before the State Commission alleging that the insurer had committed an unfair trade practice. The State Commission allowed the complaint only against the respondent bank who was directed to pay the amount with interest and damages. However the National Commission reversed the judgment of the State Commission. Thus the appeal reached this court.

The counsel for the appellant quoted the clause 3(2) & 4(1) of the Insurance Regulatory and Development Authority. Also the judgment Biman Krishna Bose v United India Insurance Co Ltd was quoted by this counsel.

The counsel for the respondent bank argued that there was no deficiency of service on the part of the bank. Under the terms of the agreement it was obligatory to obtain an insurance cover. Also arguments were made supporting the findings of the National Commission. The counsel for the respondent insurer argued that since the appellants received the policy from the bank, they cannot disclaim knowledge of exclusion.

The court listened to the arguments of both the counsel and observed that while interpreting the contract of insurance effect must be given to the words of contract and intent. Also the case General Assurance Society Ltd v Chandumull Jain was referred by this court. Reference was made to Section 64(VB) of the Insurance Act 1938. Reliance was made to paragraph 5 of Biman Krishna Bose v United India Insurance Co Ltd of the case referred by the appellant counsel.

Thus the court viewed that there is no merit in the present appeal and dismissed the same with no order as to cost.




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