NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION
(Against
the order dated
24.3.2004 in Appeal No. 539/2000
of the State Commission, Tamil Nadu)
G.
Kothainachiar,
W/o
K. Govindan,
1-A,
Madavarwalagam,
Srivilliputtur, Tamil Naadu-626 125i … Petitioner
Vs.
1. The Branch Manager,
United India Insurance Co. Ltd.,
C-52, 1st
Anna Nagar,
Chennai-600 102
2. Divisional Manager,
United India Insurance Co. Ltd.,
58,
Chennai-600 007.
3. Manager, Grievances Department,
Head Office,
United India Insurance Co. Ltd.,
24,
Chennai-600
014
4. Divisional Manager,
United India Insurance Co. Ltd.,
Sivakasi Division,
Sivakasi,
Tamil Nadu …
Respondents
BEFORE:
MRS. RAJYALAKSHMI RAO, MEMBER
HON’BLE MR. JUSTICE K.S. GUPTA, MEMBER
For the Petitioner : Mr.P.S.Seetharaman,
Advocate.
For the Respondents : Mr. Kishore Rawat, Advocate.
Dated
M.B.SHAH, J. PRESIDENT:
In this case the contention of the
Opposite Party Insurance Company is that the Complainant is not entitled to reimbursement of
loss/damage caused to his vehicle, from
the Insurance Company as the vehicle was plied without ‘fitness certificate’,
which is in violation of the Motor Vehicles Act, 1988. In support of this
contention, reliance is placed upon a decision of this Commission. Against that
the Complainant has relied on some of the judgments of
the
In
order to avoid the confusion on the question involved in this case, by order
dated 10.1.2007 it was directed that the matter be placed before the larger
Bench.
FACTS:
This Revision Petition is filed against
the order dated 24.3.2004 passed by the State Consumer Disputes Redressal
Commission, Chennai, in A.P. No. 539 of 2000, allowing the appeal of the
Insurance Company. The State Commission observed that on the date of the
accident there was no fitness certificate relating to the vehicle and,
therefore, there
was a breach of Section 84(a) of the Motor Vehicles Act and set aside the order
passed by the District Forum in O.P. No.
113 of 1997 decided by the District Forum on 20.6.2004.
The District Forum has allowed the
complaint and directed the Insurance Company to reimburse the Complainant for a
sum of Rs.50,508/- towards the damage caused to the car on the basis of the
assessment made by the Insurance Company and also to pay a sum of Rs.10,000/-
for mental agony and Rs.1,000/- for expenses.
In the present case the insured vehicle
met with an accident
on 20.6.1995. Admittedly, the insured was having fitness
certificate till 30.5.1995. It is
contended that as there was
violation of the provision of the Motor Vehicle Act which
requires that vehicle cannot be used
without having fitness certificate, the insured is not entitled to have
reimbursement from the Insurance Company.
In our view, this contention is
required to be examined on the basis of the terms of the policy. The relevant terms of the policy with regard
to the limitation as to use are as under:-
“LIMITATION AS TO USE:-
Use only for
carriage of passengers in accordance with the permits (contract carriage or
stage carriage) issued within the meaning of the Motor Vehicles Act, 1988. The policy does not cover:
1. Use for organized racing,
pace-making, reliability trial or speed testing.
2. Use whilst drawing a
trailer except the towing (other than for reeard) of any one disabled mechanically propelled
vehicle.
LIMITS OF LIABILITY:-
(a) Limit of the amount of the Company’s liability
under Section II-1(i)
in respect of any one accident as
per Motor Vehicles Act, 1958.
(b) Limit of the amount of the Company’s
liability under Section II-I(ii) in
respect of any one claim or series of claims arising out of one event –
Rs.6,000/-“.
Further, admittedly insured was having
fitness certificate for more than 10 years. It expired only on 30.5.1995 i.e.
before 20 days of the accident. The
certificate could not be obtained because of physical ill-health of the insured
as contended. Further, as per the RTO Inspector’s report, the vehicle was in
good condition for plying at the time of accident.
Findings:
At
the outset, it is to be stated that that liability of the insurance Company is
two-fold:
(i) statutory liability as provided under
the Motor Vehicles Act, and
(ii) liability
to the insured as per the terms of the contract.
From
the facts stated above, it is apparent that there is no breach of policy condition, that is to say that there is no breach of the
contract of insurance. Hence, on the
ground of breach of
condition of the policy,
the claim cannot be repudiated.
The
alleged breach is with regard to the provisions of Motor Vehicles Act. Therefore, the question would be whether the
Insurance Company can repudiate the
claim on the alleged ground of breach of some provisions of the Motor Vehicles
Act or some other Act. It is not the case of the
Insurance Company that the policy is a
statutory policy.
In
our view, the
Insurance Company cannot repudiate the claim when there is no breach of terms
of the policy, because insurance is a
matter of contract between the parties.
.A. . Between the insured and the insurer – parties are governed by
the terms of the policy:
The insurance is a contract between the
parties and the parties are governed by the terms of the contract. The law on
the subject is settled and for this purpose, we would refer to some of the
decisions of the
.(i). In the case of Oriental Insurance Co. Ltd. Vs. Sony Cheriyan, (1999) 6 SCC 451 (p.455), it was observed as
under:
“17. The insurance policy between the insurer and the insured represents
a contract between the parties. Since the insurer undertakes to compensate
the loss suffered by the insured on account of risks covered by the
insurance policy, the terms of the agreement have to be strictly
construed to determine the extent of liability of the insurer. The insured
cannot claim anything more than what is covered by the insurance policy. That
being so, the insured has also to act strictly in accordance with the statutory
limitations or terms of the policy expressly set out therein”.
.(ii). In the case of New India Assurance Co. Ltd., Shimla
vs. Kamla & Ors. – (2001) 4 SCC 342 at page 350, the Supreme Court observed:
“25. The insurer and the insured
are bound by the conditions enumerated in the policy and the insurer is not
liable to the insured if there is violation of any policy condition. But the insurer who is made statutorily liable to pay compensation to
third parties on account of the certificate of insurance issued shall be
entitled to recover from the insured the amount paid to the third parties, if
there was any breach of policy conditions on account of the vehicle being
driven without a valid driving licence”
.(iii). In the case of Jitendra Kumar
v. Oriental Insurance Co. Ltd.,(2003) 6 SCC 420 (at P.422) the
“9. We have heard the learned counsel for the respondents who has
supported the orders of the State Commission as well as that of the National
Commission. So far as the facts of this case are concerned, there is hardly any
dispute, therefore, we can safely proceed on the basis that the vehicle in
question was damaged due to a mechanical fault and no fault of the driver. For
the purpose of argument, we may also proceed on the basis that the driver of
the car did not have a valid driving licence. The
question then is: can the Insurance Company repudiate a claim made by the owner
of the vehicle which is duly insured with the Company, solely on the ground
that the driver of the vehicle who had nothing to do with the accident did not
hold a valid licence? The answer to this question,
in our opinion, should be in the negative. Section 149 of the Motor
Vehicles Act, 1988 on which reliance was placed by the State Commission, in our
opinion, does not come to the aid of the Insurance Company in repudiating a
claim where the driver of the vehicle had not contributed in any manner to the
accident. Section 149(2)(a)(ii) of the Motor Vehicles
Act empowers the Insurance Company to repudiate a claim wherein the vehicle in
question is damaged due to an accident to which driver of the vehicle who does
not hold a valid driving licence is responsible in
any manner. It does not empower the Insurance Company to repudiate a claim for
damages which has occurred due to acts to which the driver has not, in any
manner, contributed i.e. damages incurred due to reasons other than the act of
the driver”.
.(iv).
Even a three Judge Bench of the
Apex Court in the case of National Insurance Co. Ltd. Vs. Swaran
Singh (2004) 3 SCC 297 at 327 observed as under:
“55.
A contract of insurance also falls within the realm of contract. Thus, like any other contract, the intention
of the parties must be gathered from the expression used therein.”
.B. Statutory Liability:
For
the third party, the liability is statutory and that has been clarified by the
“the mere fact that there was violation of the terms and conditions
subject to which the insurance policy
had been issued, cannot have the effect
of exonerating the insurer from the statutory liability cast upon him in
this regard to pay the amount to the
third party victim.”
Further, it is observed that
“.… It will, therefore, be open to the insurer
appellant to initiate an appropriate proceeding for the refund of the amount
paid by it to the claimants and
establish the breach of the terms and conditions subject to which the insurance
policy had been issued”.
.C. Repudiation in case of
fundamental or material breach of policy conditions;
Further,
Claim for reimbursement can be repudiated in case where the breach of condition
of the policy is fundamental or
material. This would be clear from the
following pronouncements by the
(i) B.V. Nagaraju v. Oriental Insurance Co. Ltd., Divisional
Officer, Hassan, (1996) 4 SCC 647 ,
at page 650 :
“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. In the instant case,
however, we find no such contributory factor”.
.(ii). National Insurance Co. Ltd. Vs. Swaran Singh (2004) 3 SCC 297
(at page 337):
“In each case, on evidence led before the Tribunal, a decision has to be
taken whether the fact of the driver possessing licence
for one type of vehicle but found driving another type of vehicle, was the main
or contributory cause of accident. If on facts, it is found that the
accident was caused solely because of some other unforeseen or intervening
causes like mechanical failures and similar other causes having no nexus with
the driver not possessing requisite type of licence,
the insurer will not be allowed to avoid its liability merely for technical
breach of conditions concerning driving licence”.
Further, (in para 90) it is held as under:
“90. We have construed and determined the scope
of sub-clause (ii) of sub-section (2) of Section 149 of the Act. Minor
breaches of licence conditions, such as want of
medical fitness certificate, requirement about age of the driver and the like not
found to have been the direct cause of the accident, would be treated as
minor breaches of inconsequential deviation in the matter of use of vehicles.
Such minor and inconsequential deviations with regard to licensing conditions
would not constitute sufficient ground to deny the benefit of coverage
of insurance to the third parties.”
In para 145(vi)
one of the conclusion is :
(vi). Even where the insurer is able to prove breach on the part of the
insured concerning the policy condition regarding holding of a valid licence by the driver or his qualification to drive during
the relevant period, the insurer would not be allowed to avoid its liability
towards the insured unless the said breach or breaches on the condition of
driving licence is/are so fundamental as are found to
have contributed to the cause of the accident. The Tribunals in
interpreting the policy conditions would apply “the rule of main purpose” and
the concept of “fundamental breach” to allow defences
available to the insurer under Section 149(2) of the Act.
From
the settled law quoted above, it is apparent that the Insurance Company can
repudiate the claim of the insured in case where there is a breach of the
policy condition/conditions; and, the breach is fundamental or material so as
to vitiate the insurance contract.
Similar/same is the policy of the Insurance Companies. The policy is
framed by the General Insurance Corporation of
D. The Guidelines for Settlement of Non-standard Claims and the Formula for the same are as under :
“1) where a
breach of warranty or policy condition (hereafter referred to as
breach) arises and where such breach is of a technical nature or
is evidently beyond the control or knowledge of the insured or is considered
after rectifying the policy and collecting additional premium where due. In settling the claim, a deduction may be
made from the assessed claim amount equivalent to the extra premium due for
three years or three times the additional premium due for voyage which would
have been charged had correct information been available originally.
2) Where the breach is
material to the loss or where an act of
the insured or his agent has contributed to such a breach in such
cases if the insured has acted with the best of intentions and has not
consciously committed the breach or where the legal question of liability is in
doubt, payment may be considered on merits of each case, upto
a maximum of 75% of the assessed amount of loss.
“where the breach is material to the loss and the amount
determined to be payable upto the maximum of 75% of
the assessed amount of loss is found to be higher than what would be
payable had the claim been dealt with as one where the breach is of a technical
nature, the compromise settlement should be made only for the lower amount.”
PROCEDURE
a) Additional premium for the unexpired period of the risk for rectifying
the breach should be collected separately on pro-rata basis and credited to
premium account.
b) The amount equivalent to 3 years difference in premium or three times
the additional premium due for the voyage or 25% of the assessed loss as per
guidelines be deducted from the claim amount as assessed by the surveyor and
the net amount of the claim paid to the claimant be debited to the claim paid
account. Please note that unless
additional premium for rectification of the policy for the unexpired period as
per (a) above is paid by the insured, the claim cheque need not be
released………………………………………………..
It is further laid down that :
“The three types of claims which can be settled as
non-standard under the guidelines are set out hereunder :
“Non-Standard Claims
Following
types of claims shall be considered as non-standard and shall be settled as
indicated below after recording the reasons :
S.No. Description %age of settlement
i) Under
declaration of Deduct 3 years difference in
licensed carrying premium from the amount of
capacity. claim or deduce
25% of the
claim amount
whichever is
higher.
ii) Overloading of vehicles Pay claims not exceeding
beyond licensed carrying 75%
of admissible claim.
capacity.
iii) Any other breach of Pay upto 75% of
warranty/condition of admissible
claim.
policy including limitation
as to use.
As
stated above, in the present case, the insured was having fitness certificate
with regard to the vehicle till
In the result, the Revision
Petition is allowed. The Insurance
Company is directed to pay a sum of Rs.50,508/- towards the damage caused to
the car and also to pay Rs.10,000/- as compensation for harassment and Rs.1,000/-
as cost of litigation, as ordered by the District Forum, within a period of six
weeks from today. There shall be no
order as to costs.
( M.B. SHAH )
PRESIDENT
……………………………………………
( RAJYALAKSHMI RAO )
MEMBER
…………………………………………..J.
( K.S. GUPTA )
MEMBER