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Saturday, February 6, 2016

not produced any evidence on record to prove that the accident occurred on account of the overloading of passengers in the goods carrying vehicle.= “It is plain from the terms of the Insurance Policy that the insured vehicle was entitled to carry six workmen, excluding the driver. If those six workmen when travelling in the vehicle, are assumed not to have increased risk from the point of view of the Insurance Company on occurring of an accident, how could those added persons be said to have contributed to the causing of it is the pose, keeping apart the load it was carrying. In the present case the driver of the vehicle was not responsible for the accident. Merely by lifting a person or two, or even three, by the driver or the cleaner of the vehicle, without the knowledge of the owner, cannot be said to be such a fundamental breach that the owner should, in all events, be denied indemnification. The misuse of the vehicle was somewhat irregular though, but not so fundamental in nature so as to put an end to the contract, unless some factors existed which by themselves, had gone to contribute to the causing of the accident=There Lordships discussed the position and held ultimately that a defence under Section 149(2)(a)(ii) of the Act was available to an insurer when a claim is filed either under Section 163-A or under Section 166 of the Act. The breach of a policy condition has to be proved to have been committed by the insured for avoiding liability by the insurer. Mere absence of or production of fake or invalid driving licence or disqualification of the driver for driving at the relevant time, are not in themselves defences available to the insurer against either the insured or the third party. The insurance company to avoid liability, must not only establish the available defence raised in the proceeding concerned but must also establish breach on the part of the owner of the vehicle for which the burden of proof would rest with the insurance company. Whether such a burden had been discharged, would depend upon the facts breach on the part of the insured concerning a policy condition, the insurer would not be allowed to avoid its liability towards the insured unless the said breach of condition is so fundamental as to be found to have contributed to the cause of the accident.” (emphasis laid by this Court) It becomes very clear from a perusal of the above mentioned case law of this Court that the insurance company, in order to avoid liability must not only establish the defence claimed in the proceeding concerned, but also establish breach on the part of the owner/insured of the vehicle for which the burden of proof would rest with the insurance company. In the instant case, the respondent-Company has not produced any evidence on record to prove that the accident occurred on account of the overloading of passengers in the goods carrying vehicle. Further, as has been held in the case of B.V. Nagaraju (supra) that for the insurer to avoid his liability, the breach of the policy must be so fundamental in nature that it brings the contract to an end. In the instant case, it is undisputed that the accident was infact caused on account of the rash and negligent driving of the offending vehicle by its driver, against whom a criminal case vide FIR no. 66 of 2010 was registered for the offences referred to supra under the provisions of the IPC. These facts have not been taken into consideration by either the State Commission or National Commission while exercising their jurisdiction and setting aside the order of the District Forum. Therefore, the judgment and order of the National Commission dated 26.04.2013 passed in the Revision Petition No. 2032 of 2012 is liable to be set aside, as the said findings recorded in the judgment are erroneous in law.



                                                              NON-REPORTABLE


     IN THE SUPREME COURT OF INDIA                        CIVIL APPELLATE
                                JURISDICTION



                       CIVIL APPEAL NOS.49-50 OF 2016
              (Arising Out of SLP (C) Nos.37534-37535 of 2013)



LAKHMI CHAND                                  …………APPELLANT

                                     Vs.

RELIANCE GENERAL INSURANCE           …………RESPONDENT


                                 J U D G M E N T



V. GOPALA GOWDA, J.

Leave granted.

The present appeals arise out of  the  impugned  judgment  and  order  dated
26.04.2013 in Revision Petition No. 2032 of 2012 and order dated  23.07.2013
in Review Petition No. 253 of 2013 passed by the National Consumer  Disputes
Redressal Commission, New Delhi (hereinafter referred to  as  the  “National
Commission”), whereby the petitions challenging the order  dated  29.02.2012
passed by the Haryana State  Consumer  Disputes  Redressal  Commission  were
dismissed.


 The brief facts of the case which are  required  to  appreciate  the  rival
legal contentions advanced by the learned counsel  appearing  on  behalf  of
the parties are stated in brief as hereunder:-



The appellant was the owner of a Tata Motors goods carrying vehicle  bearing
registration No.HR-67-7492. The vehicle was  insured  with  the  respondent-
Company vide policy  No.  15019923334104992  with  effect  from  31.07.2009,
valid upto 30.07.2010. The risk covered in this policy was to  the  tune  of
Rs.2,21,153/-. The said vehicle  met  with  an  accident  on  11.02.2010  on
account of rash and negligent  driving  of  the  offending  vehicle  bearing
registration no. UP-75-J 9860. In this regard, an FIR No.66  of  2010  dated
11.02.2010 was registered with the  jurisdictional  Police  Station,  Sadar,
Fatehabad, for the offence punishable under Sections 279, 337, 304A and  427
of the Indian Penal Code (hereinafter referred to as “the IPC”).



The appellant incurred expenses amounting to Rs.1,64,033/-  for  the  repair
of his vehicle and also informed the respondent- Company about the  accident
and damage caused to  his  vehicle.  In  this  connection,  the  respondent-
Company appointed one Mr. Atam Prakash Chawla, as  the  Surveyor  to  assess
the damage caused to the said vehicle. After  inspecting  the  vehicle,  the
Surveyor assessed the damage caused to the vehicle at  Rs.90,000/-,  whereas
the appellant had  preferred  a  claim  for  a  sum  of  Rs.1,64,033/-  with
supporting bills. In addition to  above,  the  respondent-Company  appointed
M/s Innovation Auto Risk Claim Manager for  the  purpose  of  investigation.
According  to  the  report  of  the  investigator,  five   passengers   were
travelling in the goods-carrying vehicle, though  the  seating  capacity  of
the vehicle as per the registration certificate was only 1+1. On  the  basis
of findings of the said report, the  respondent-Company  vide  letter  dated
26.07.2010 rejected the claim of the appellant for the reason that the  loss
did not fall within the scope and purview of the insurance policy.



Aggrieved of the letter of rejection of the claim of the  appellant  by  the
respondent-Company,  he  filed  Complaint  No.517  of   2010   against   the
respondent-Company dated 17.09.2010 before the  District  Consumer  Disputes
Redressal Forum, Sonepat (hereinafter referred to as the  “District  Forum”)
under Section 12 of the Consumer Protection  Act,  1986  for  the  claim  of
Rs.1,64,033/- towards the repair of his  vehicle  on  the  ground  that  the
rejection of the claim amounts to deficiency in service on the part  of  the
respondent-Company.



 The respondent-Company  filed  a  detailed  written  statement  before  the
District Forum disputing the claim of the appellant. It took the  plea  that
the complainant had violated the terms and  conditions  of  the  policy,  as
five passengers were travelling in the goods-carrying vehicle  at  the  time
of accident, whereas the permitted seating capacity of the motor vehicle  of
the appellant was only 1+1.



The District Forum on the basis of the pleadings  of  the  parties  and  the
materials on record considered the judgment of the  National  Commission  in
the case of National Insurance  Co.  Ltd.  v.  Pravinbhai  D.  Prajapati[1],
wherein it was held that if the number of persons travelling in the  vehicle
at the time of the  accident  did  not  have  a  bearing  on  the  cause  of
accident, then the mere factum of  the  presence  of  more  persons  in  the
vehicle  would  not  disentitle   the   insured   claimant   from   claiming
compensation under the policy towards the  repair  charges  of  the  vehicle
paid  by  the  appellant.  The  District  Forum  accordingly  directed   the
respondent-Company to settle the claim  of  the  appellant  on  non-standard
basis upto 75% of the amount spent for  effecting  repairs  to  the  damaged
vehicle after taking into consideration the claim amount  of  Rs.1,64,033/-.
The District Forum further directed the  respondent-Company  to  settle  the
amount to be paid to the appellant along with interest at  the  rate  of  9%
per annum from the date of lodging of the claim by the  appellant  with  the
respondent-Company. The  respondent-Company  was  further  directed  to  pay
Rs.2,000/-  for  rendering  deficient  service,  causing  mental  agony  and
harassment and towards litigation expenses incurred by the appellant.



Aggrieved of the  order  of  the  District  Forum,  the  respondent  Company
preferred an appeal before the State Commission urging various grounds.  The
State Commission placed reliance upon the judgment  of  this  Court  in  the
case of Suraj Mal Ram Niwas Oil Mills (P) Ltd.  v.  United  India  Insurance
Co. Ltd. & Anr.[2], wherein it was held as under:



“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  law  have  to  be  strictly
construed and no exception can be made on the ground of equity.



Thus, it needs little emphasis that in construing the terms  of  a  contract
of insurance important, 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 risk 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.”



The State Commission applied the observation made in the above said case  by
this Court to the case  on  hand  and  held  that  the  District  Forum  has
committed a serious error in allowing the complaint filed by  the  appellant
herein against the respondent-Company. The  State  Commission  accepted  the
appeal filed by the respondent-Company and dismissed the  complaint  of  the
appellant, vide its order dated 29.02.2012 by  setting  aside  the  judgment
and order of the District Forum.



The said judgment passed by the  State  Commission  was  challenged  by  the
appellant before the National Commission by way of filing Revision  Petition
No.2032 of 2012 under Section 21(b) of the  Consumer  Protection  Act,  1986
questioning the correctness of the same by urging various tenable grounds.



After examining the material evidence on  record,  the  National  Commission
has arrived at the conclusion and held that the factum  of  the  vehicle  in
question carrying six passengers at  the  time  of  the  occurrence  of  the
accident was an undisputed fact. Thus, there had been  a  violation  of  the
terms and conditions of the insurance policy covered to the vehicle  by  the
appellant, as he had allowed six passengers to travel in  the  vehicle  when
the permitted load was only 1+1. The National Commission  upheld  the  order
passed by the State Commission and dismissed the Revision Petition filed  by
the appellant by recording its reasons. The Review  Petition  filed  against
the  dismissal   of   the   Revision   Petition   by   the   appellant   was
also dismissed without considering  the  grounds  urged  for  reviewing  its
order.



The present appeals have been filed challenging the  orders  passed  by  the
National Commission in dismissing the Revision and Review petitions. In  our
considered  view,  the  concurrent  findings  recorded   by   the   National
Commission in the impugned judgment and order are erroneous in law  for  the
following reasons.



It is an admitted fact that the accident of the  vehicle  of  the  appellant
was caused on account  of  rash  and  negligent  driving  of  the  offending
vehicle bearing registration no. UP-75-J9860. An FIR No. 66  of  2010  dated
11.02.2010 was registered under Sections 279, 337, 338,  304-A  and  427  of
the Indian Penal Code against  the  driver  of  the  said  vehicle  for  the
offences referred to supra. The vehicle of the appellant was  badly  damaged
in the accident and it is an undisputed fact that  the  report  of  Surveyor
assessed the loss at Rs.90,000/-, but the  actual  amount  incurred  by  the
appellant on the repair of his vehicle was  Rs.1,64,033/-.  The  said  claim
was arbitrarily rejected by the respondent-Company on the  ground  that  the
damage caused to the vehicle did not fall within the scope  and  purview  of
the insurance policy, as there was a contravention of terms  and  conditions
of the policy of the vehicle.



The National Commission upheld the order of dismissal of  the  complaint  of
the appellant passed  by  the  State  Commission.  The  National  Commission
however, did not consider the judgment of this Court in  the  case  of  B.V.
Nagaraju v. Oriental Insurance Co. Ltd  Divisional  Officer,  Hassan[3].  In
that case, the insurance company had taken the defence that the  vehicle  in
question was carrying more passengers than the permitted capacity  in  terms
of the policy at the time of the accident. The said plea  of  the  insurance
company was rejected. This Court held that the mere factum of carrying  more
passengers than  the  permitted  seating  capacity  in  the  goods  carrying
vehicle by the insured  does not amount  to  a  fundamental  breach  of  the
terms and conditions of the policy so as to allow the insurer to eschew  its
liability towards the damage caused to the vehicle. This Court in  the  said
case has held as under:-

“It is plain from the  terms  of  the  Insurance  Policy  that  the  insured
vehicle was entitled to carry six workmen, excluding the  driver.  If  those
six workmen when  travelling  in  the  vehicle,  are  assumed  not  to  have
increased risk from the point of view of the Insurance Company on  occurring
of an accident, how could those added persons be said  to  have  contributed
to the causing of it is the pose, keeping apart the load  it  was  carrying.
In the present case the driver of the vehicle was not  responsible  for  the
accident. Merely by lifting a person or two, or even three,  by  the  driver
or the cleaner of the vehicle, without the knowledge of  the  owner,  cannot
be said to be such a fundamental  breach  that  the  owner  should,  in  all
events, be denied indemnification. The misuse of the  vehicle  was  somewhat
irregular though, but not so fundamental in nature so as to put  an  end  to
the contract, unless some factors existed which by themselves, had  gone  to
contribute to the causing of the accident.”
                         (emphasis laid by this Court)

Further, in the case of National Insurance Company Ltd. v.  Swaran  Singh  &
Ors[4]. a three judge bench of this Court has held as under:-



”49. Such a breach on the part of the insured must  be  established  by  the
insurer to show that not only the insured used or caused or permitted to  be
used the vehicle in breach of the Act but also that the damage  he  suffered
flowed from the breach.



52. In Narvinva’s case (supra) a Division  Bench  of  this  Court  observed:
“The insurance company complains of breach  of  a  term  of  contract  which
would permit it to disown its liability under the contract of insurance.  If
a breach of a term of contract permits a party to  the  contract  complaints
of breach to prove that the breach has been committed by the other party  to
the contract. The test in such a situation would be who  would  fail  if  no
evidence is led.



69. The proposition of law is no longer res- integra  that  the  person  who
alleges breach  must  prove  the  same.  The  insurance  company  is,  thus,
required to establish the said breach by cogent evident. In  the  event  the
insurance company fails to prove that there has been  breach  of  conditions
of policy on the part of  the  insured,  the  insurance  company  cannot  be
absolved of its liability.”

                                               (emphasis laid by this Court)



The judgment  in  the  case  of  Swaran  Singh  (supra)  has  been  followed
subsequently in the  case  of  Oriental  Insurance  Company  Ltd.  v.  Meena
Variyal[5], wherein this Court held as under:-



“We shall now examine the decision in Swaran Singh on which practically  the
whole of the arguments on behalf of the claimants were rested. On  examining
the facts, it is found that, that was a case which related to a claim  by  a
third party. In claims by a third party, there cannot  be  much  doubt  that
once the liability of the owner is found, the insurance  company  is  liable
to indemnify the owner, subject of  course,  to  any  defence  that  may  be
available to it  under  Section  149(2)  of  the  Act.  In  case  where  the
liability is satisfied by the insurance company in the  first  instance,  it
may have recourse to the owner in respect  of  a  claim  available  in  that
behalf, it may have recourse to the owner in respect of  a  claim  available
that behalf. Swaran Singh was a case where the insurance  company  raised  a
defence that the owner had permitted the vehicle to be driven  by  a  driver
who really had no licence and the driving licence  produced  by  him  was  a
fake one. There Lordships discussed the position and held ultimately that  a
defence under Section 149(2)(a)(ii) of the Act was available to  an  insurer
when a claim is filed either under Section 163-A or  under  Section  166  of
the Act. The breach of a policy condition has to  be  proved  to  have  been
committed by the  insured  for  avoiding  liability  by  the  insurer.  Mere
absence  of  or  production  of  fake  or   invalid   driving   licence   or
disqualification of the driver for driving at the relevant time, are not  in
themselves defences available to the insurer against either the  insured  or
the third party. The insurance company to avoid  liability,  must  not  only
establish the available defence raised in the proceeding concerned but  must
also establish breach on the part of the owner of the vehicle for which  the
burden of proof would rest  with  the  insurance  company.  Whether  such  a
burden had been discharged, would depend upon the facts breach on  the  part
of the insured concerning a policy  condition,  the  insurer  would  not  be
allowed to avoid its liability towards the insured unless  the  said  breach
of condition is so fundamental as to be found to  have  contributed  to  the
cause of the accident.”
                (emphasis laid by this Court)

It becomes very clear from a perusal of the  above  mentioned  case  law  of
this Court that the insurance company, in order to avoid liability must  not
only establish the defence claimed in the  proceeding  concerned,  but  also
establish breach on the part of the owner/insured of the vehicle  for  which
the burden of proof would rest with the insurance company.  In  the  instant
case, the respondent-Company has not produced  any  evidence  on  record  to
prove  that  the  accident  occurred  on  account  of  the  overloading   of
passengers in the goods carrying vehicle. Further, as has been held  in  the
case of B.V. Nagaraju (supra) that for the insurer to avoid  his  liability,
the breach of the policy must be so fundamental in  nature  that  it  brings
the contract to an end. In the instant  case,  it  is  undisputed  that  the
accident was infact caused on account of the rash and negligent  driving  of
the offending vehicle by its driver, against whom a criminal case  vide  FIR
no. 66 of 2010 was registered for the offences referred to supra  under  the
provisions of the IPC. These facts have not been  taken  into  consideration
by either the State  Commission  or  National  Commission  while  exercising
their jurisdiction and setting  aside  the  order  of  the  District  Forum.
Therefore,  the  judgment  and  order  of  the  National  Commission   dated
26.04.2013 passed in the Revision Petition No. 2032 of 2012 is liable to  be
set aside, as the said findings recorded in the judgment  are  erroneous  in
law.



Accordingly, we allow these appeals and restore the judgment  and  order  of
District Forum. Further, we award a sum of Rs.25,000/- towards the  cost  of
the litigation as the respondent-Company  has  unnecessarily  litigated  the
matter up to this Court despite the clear pronouncement of law laid down  by
this Court on the question  with  regard  to  the  violation  of  terms  and
conditions of the policy and burden of proof is on the insurer to prove  the
fact of such alleged breach of terms and conditions by the insured.





Since we have restored the judgment and order of District Forum,  we  direct
the respondent-Company to pay the amount awarded by the District Forum  with
interest and the cost which we have awarded in these proceedings within  six
weeks from the date of the receipt of the copy of this judgment.



…………………………………………CJI.                       [T.S. THAKUR]



     ………………………………………………J.
      [V. GOPALA GOWDA]
New Delhi,
January 7, 2016


ITEM NO.1B-For Judgment     COURT NO.10          SECTION XVII

               S U P R E M E  C O U R T  O F  I N D I A
                       RECORD OF PROCEEDINGS

Civil Appeal  No(s).49-50/2016 arising from SLP(C) Nos.  37534-37535/2013

LAKHMI CHAND                                       Appellant(s)

                                VERSUS

RELIANCE GENERAL INSURANCE                       Respondent(s)

Date : 07/01/2016 These appeals were called for  pronouncement  of  JUDGMENT
today.

For Appellant(s)
                     Mr. Munawwar Naseem,Adv.

For Respondent(s)
                     Mr. Garvesh Kabra,Adv.


      Hon'ble Mr. Justice V.Gopala Gowda  pronounced  the  judgment  of  the
Bench comprising Hon'ble the Chief Justice and His Lordship.
      Leave granted.
      The  appeals  are  allowed  in  terms  of  the  signed  Non-Reportable
Judgment.

        (VINOD KUMAR)                    (MALA KUMARI SHARMA)
         COURT MASTER                        COURT MASTER
         (Signed Non-Reportable judgment is placed on the file)


-----------------------
[1]   [2] IV 2010 CPJ 315 (NC)
[3]   [4] (2010) 10 SCC 567
[5]   [6] (1996) 4 SCC 647
[7]   [8] (2004) 3 SCC 297
[9]   [10] (2007) 5 SCC 428

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