2010 Supreme(SC) 174

2010 (1) Supreme 658
SUPREME COURT OF INDIA
K.G. Balakrishnan, CJI., R. V. Raveendran, D. K. Jain, P. Sathasivam and J. M. Panchal, JJ.
Economic Transport Organization — Appellant
versus
M/s. Charan Spinning Mills (P) Ltd. & Anr. — Respondents
Civil Appeal No.5611 of 1999
Decided on : 17-02-2010

IMPORTANT POINTS
1. A wrong-doer cannot sidetrack the issue before the consumer forum. Once the ‘consumer’, that is the assured, is the complainant, the complaint will be maintainable subject to fulfillment of the requirements of the Act.
2. Section 14(1)(d) of CP Act does not operate to relieve the carrier against the presumption of negligence created under Section 9 of the Carriers Act.
3. Even if the letter of subrogation executed by the assured in favour of the insurer contains in addition to the words of subrogation, any words of assignment, the complaint would be maintainable so long as the complaint is in the name of the assured and insurer figures in the complaint only as an attorney holder or subrogee of the assured.
4. The insurer cannot in its own name maintain a complaint before a consumer forum under the Act, even if its right is traced to the terms of a Letter of subrogation-cum-assignment executed by the assured.

Headnote:Consumer Protection Act,1986-Section 2(1)(g)-Respondent 1 a manufacturer of cotton yarn took a policy of insurance from respondent2 ‘Insurer’, covering transit risks in respect of cotton yarn sent by it to various consignees through rail or road against theft, pilferage, non-delivery and/or damage- Respondent 1entrusted a consignment of hosiery cotton yarn of the value of Rs.7,70,948/- to appellant ‘carrier’ for transportation and delivery to a consignee at Calcutta- The goods vehicle carrying the said consignment met with an accident and the consignment was completely damaged.-On the basis of a surveyor’s certificate issued after assessment of the damage, respondent 2 settled the claim of respondent 1 for Rs.447,436/- - On receiving the payment, respondent 1 executed a Letter of Subrogation-cum-Special Power of Attorney in favour of respondent2 - Thereafter,respondents 1 and 2 filed a complaint under the C P Act, 1986 against appellant claiming compensation of Rs.447,436/-with interest at 12% per annum, for deficiency in service, as the damage to the consignment was due to the negligence on part of appellant and its servants- It was averred that insurer as subrogee was the co-complainant in view of the statutory subrogation in its favour on settlement of the claim and the letter of subrogation-cum- special power of attorney executed by the Assured- District Forum allowed the complaint and directed the appellant to pay Rs.447,436/- with interest at the rate of 12% per annum from the date of accident till date of payment to the Insurer, on the basis of the subrogation- District Forum held that failure to deliver consignment in sound condition was a deficiency in service,in view of the unrebutted presumption of negligence arising under sections 8 and 9 of the Carriers Act, 1865-Appeal –Dismissed by State Commission- Revision Petition thereagainst-Dismissed by National Commission –Appeal- Case of appellants that what was executed in favour of Insurer, though termed a ‘subrogation’ was an assignment, and therefore, Insurer was not entitled to maintain the complaint- Held insurer, as subrogee, can file a complaint under Act either in the name of the assured as his attorney holder or in the joint names of the assured and insurer for recovery of amount due from the service provider-The insurer may also request the assured to sue the wrong doer (service provider)- Even if the letter of subrogation executed by assured in favour of the insurer contains in addition to words of subrogation, any words of assignment, complaint would be maintainable so long as the complaint is in the name of the assured and insurer figures in complaint only as an attorney holder or subrogee of assured- The insurer cannot in its own name maintain a complaint before a consumer forum under the Act, even if its right is traced to the terms of a Letter of subrogation-cum-assignment executed by the assured- Oberai is not good law insofar as it construes a Letter of subrogation-cum-assignment, as a pure and simple assignment- But to the extent it holds that an insurer alone cannot file a complaint under the Act, the decision is correct-Appeal dismissed (Para 24)

        Consumer Protection Act,1986-Section 2(1)(g)- Deficiency”-”Deficiency” means any fault, imperfection, short-coming,or inadequacy in the quality, nature and manner of performance which is required to be maintained by or under any law for the time being in force or has been undertaken to be performed by a person in pursuance of a contract or otherwise in relation to any service (Para 9)

        Doctrine of Subrogation-Principles governing-The equitable assignment of the rights and remedies of the assured in favour of the insurer, implied in a contract of indemnity, known as ‘subrogation’, is based on two basic principles of equity -No tort-feasor should escape liability for his wrong-No unjust enrichment for the injured, by recovery of compensation for the same loss, from more than one source-Doctrine of subrogation thus enables the insurer, to step into the shoes of the assured, and enforce the rights and remedies available to the assured (Para 11)

        Words and Phrases – Subrogation- Term ‘subrogation’ in the context of insurance, is defined in Black’s Law Dictionary as the principle under which an insurer that has paid a loss under an insurance policy is entitled to all the rights and remedies belonging to the insured against a third party with respect to any loss covered by the policy (Para 12)

        Doctrine of Subrogation-Scope and ambit of- Subrogation, as an equitable assignment, is inherent, incidental and collateral to a contract of indemnity, which occurs automatically, when the insurer settles the claim under the policy, by reimbursing the entire loss suffered by the assured- It need not be evidenced by any writing-But where the insurer does not settle the claim of assured fully, by reimbursing the entire loss, there will be no equitable assignment of the claim enabling insurer to stand in the shoes of the assured, but only a right to recover from the assured, any amount remaining out of the compensation recovered by the assured from the wrongdoer, after the assured fully recovers his loss- To avoid any dispute with the assured as to the right of subrogation and extent of its rights, the insurers usually reduce the terms of subrogation into writing in the form of a Letter of Subrogation which enables and authorizes insurer to recover the amount settled and paid by insurer, from the third party wrong-doer as a Subrogee-cum-Attorney- When the insurer obtains an instrument from the assured on settlement of the claim, whether it will be a deed of subrogation, or subrogation-cum-assignment, would depend upon the intention of parties as evidenced by wording of the document- The title or caption of the document, by itself, may not be conclusive- It is possible that the document may be styled as ‘subrogation’ but may contain in addition an assignment in regard to the balance of the claim, in which event it will be a deed of subrogation-cum-assignment- It may be a pure and simple subrogation but may inadvertently or by way of excessive caution use words more appropriate to an assignment- If the terms clearly show that the intention was to have only a subrogation, use of the words “assign, transfer and abandon in favour of” would in the context be construed as referring to subrogation and nothing more (Para 14)

        Subrogation by equitable assignment- In Subrogation by equitable assignment, subrogation is not evidenced by any document, but is based on the insurance policy and the receipt issued by the assured acknowledging the full settlement of the claim relating to the loss- Where the insurer has reimbursed the entire loss incurred by the assured, it can sue in the name of the assured for the amount paid by it to the assured-But where the insurer has reimbursed only a part of the loss, in settling the insurance claim, the insurer has to wait for the assured to sue and recover compensation from the wrongdoer; and when the assured recovers compensation, the assured is entitled to first appropriate the same towards the balance of his loss (which was not received from the insurer) so that he gets full reimbursement of his loss and the cost, if any, incurred by him for such recovery- The insurer will be entitled only to whatever balance remaining, for reimbursement of what it paid to the assured (Para 15.1)

        Subrogation by contract – In Subrogation by contract the subrogation is evidenced by an instrument- To avoid any dispute about the right to claim reimbursement, or to settle the priority of inter-se claims or to confirm the quantum of reimbursement in pursuance of the subrogation, and to ensure co-operation by the assured in suing the wrongdoer, the insurer usually obtains a letter of subrogation in writing, specifying its rights vis-‘-vis the assured- The letter of subrogation is a contractual arrangement which crystallizes the rights of the insurer vis-‘-vis the assignee- On execution of a letter of subrogation, the insurer becomes entitled to recover in terms of it, a sum not exceeding what was paid by it under the contract of insurance by suing in the name of the assured-Even where the insurer had settled only a part of the loss incurred by the assured, on recovery of the claim from the wrongdoer, the insurer may, if the letter of subrogation so authorizes, first appropriate what it had paid to the assured and pay only the balance, if any, to the assured (Para 15.2)

        Subrogation-cum-assignment-In Subrogation-cum-assignment assured executes a letter of subrogation-cum-assignment enabling the insurer retain the entire amount recovered even if it is more than what was paid to the assured giving an option to sue in the name of the assured or to sue in its own name (Para 15.3)

        Right of Subrogation-In all three types of subrogation, the insurer can sue the wrongdoer in the name of the assured-This means that the insurer requests the assured to file the suit/complaint and has the option of joining as co-plaintiff- Alternatively insurer can obtain a special power of Attorney from the assured and then to sue the wrongdoer in the name of the assured as his attorney- The assured has no right to deny the equitable right of subrogation of the insurer in accordance with law, even whether there is no writing to support it- But the assured whose claim is settled by the insurer, only in respect of a part of the loss may insist that when compensation is recovered from the wrongdoer he will first appropriate the same, to recover the balance of his loss- The assured can also refuse to execute a subrogation-cum-assignment which has the effect of taking away his right to receive the balance of the loss-But once a subrogation is reduced to writing, the rights inter-se between the assured and insurer will be regulated by the terms agreed, which is a matter of negotiation between the assured and insurer (Para 15.3)

        Complaint filed by Insurer –Maintainability-Whether the document executed by the assured in favour of the insurer is a subrogation simpliciter, or a subrogation-cum-assignment is relevant only in a dispute between the assured and the insurer- It may not be relevant for deciding the maintainability of a complaint under the Act- If the complaint is filed by the assured who is the consumer, or by the assured represented by the insurer as its attorney holder, or by the assured and the insurer jointly as complainants, the complaint will be maintainable, if the presence of insurer is explained as being a subrogee-Whether the amount claimed is the total loss or only the amount for which the claim was settled would make no difference for the maintainability of complaint, so long as the consumer is the complainant or is a co-complainant along with his subrogee- On the other hand, if the assured who is the consumer is not the complainant, and the insurer alone files the complaint in its own name, the complaint will not be maintainable, as the insurer is not a ‘consumer’, nor a person who answers the definition of ‘complainant’ under the Act- The fact that it seeks to recover from the wrongdoer (service provider) only the amount paid to the assured and not any amount in excess of what was paid to the assured will also not make any difference, if the assured - consignor is not the complainant or co-complainant-The complaint will not be maintainable unless the requirements of the Act are fulfilled- The remedy under the Act being summary in nature, once the consumer is the complainant or is a co- complainant, it will not be necessary for the Consumer Forum to probe the exact nature of relationship between the consumer (assured) and the insurer, in a complaint against the service provider (Para 19)

        Consumer Protection Act,1986- Section 14(1)(d) - Section 14(1)(d) of the Act provides that the Forum under the Act can direct payment of compensation awarded by it to the consumer for any loss or injury suffered by the consumer due to the negligence of the opposite party-Appellants case that this, makes it mandatory for complainant to establish negligence on part of opposite party, i.e. the carrier- It is further contended that presumption of negligence under Section 9 of the Carriers Act, 1865 is applicable only to a civil suit, and not to a complaint under the Act which specifically contemplates establishment of negligence by evidence- Grievance of appellants that in this case the compensation had been awarded even though no evidence was led by the complainants about negligence of driver of appellant-. It is no doubt true that Section 14(1)(d) of the Act contemplates award of compensation to the consumer for any loss suffered by consumer due to the negligence of opposite party (Carrier)- Section 9 of Carriers Act does not lay down a preposition that a carrier will be liable even if there was no negligence on its part-On the other hand, it merely raises a presumption that when there is loss or damage or non-delivery of goods entrusted to a carrier, such loss, damage or non-delivery was due to negligence of the carrier, its servant and agents.- Thus where the consignor establishes loss or damage or non-delivery of goods, it is deemed that negligence on the part of the carrier is established- The carrier may avoid liability if it establishes that the loss, damage or non- delivery was due to an act of God or circumstances beyond its control- Section 14(1)(d) of the Act does not operate to relieve the carrier against the presumption of negligence created under Section 9 of the Carriers Act- The contention of appellant that the presumption under section 9 of the Carriers Act is available only in suits filed before civil courts and not in other civil proceedings under other Acts, held not tenable (Paras 26 to 30)

       Facts of the Case :

        Respondent 1 a manufacturer of cotton yarn took a policy of insurance from respondent2 ‘Insurer’, covering transit risks in respect of cotton yarn sent by it to various consignees through rail or road against theft, pilferage, non-delivery and/or damage herein in the instant case. Respondent 1entrusted a consignment of hosiery cotton yarn of the value of Rs.7,70,948/- to appellant ‘carrier’ for transportation and delivery to a consignee at Calcutta- The goods vehicle carrying the said consignment met with an accident and the consignment was completely damaged. On the basis of a surveyor’s certificate issued after assessment of the damage, respondent 2 settled the claim of respondent 1 for Rs.447,436/- . On receiving the payment, respondent 1 executed a Letter of Subrogation-cum-Special Power of Attorney in favour of respondent2 . Thereafter, respondents 1 and 2 filed a complaint under the C P Act, 1986 against appellant claiming compensation of Rs.447,436/-with interest at 12% per annum, for deficiency in service, as the damage to the consignment was due to the negligence on part of appellant and its servants. It was averred that insurer as subrogee was the co-complainant in view of the statutory subrogation in its favour on settlement of the claim and the letter of subrogation-cum- special power of attorney executed by the Assured. District Forum allowed the complaint and directed appellant to pay Rs.447,436/- with interest at rate of 12% per annum from date of accident till date of payment to the Insurer, on the basis of the subrogation. District Forum held that failure to deliver consignment in sound condition was a deficiency in service,in view of the unrebutted presumption of negligence arising under sections 8 and 9 of the Carriers Act, 1865.Appeal thereagainst was dismissed by State Commission. Revision Petition thereagainst was also dismissed by National Commission.

        2.Present appeal has been filed against said order of National Commission.

       Findings of The Court :

        The Court held that insurer, as subrogee, can file a complaint under Act either in the name of the assured as his attorney holder or in the joint names of the assured and insurer for recovery of amount due from the service provider-The insurer may also request the assured to sue the wrong doer (service provider).Even if the letter of subrogation executed by assured in favour of the insurer contains in addition to words of subrogation, any words of assignment, complaint would be maintainable so long as the complaint is in the name of the assured and insurer figures in complaint only as an attorney holder or subrogee of assured. The insurer cannot in its own name maintain a complaint before a consumer forum under the Act, even if its right is traced to the terms of a Letter of subrogation-cum-assignment executed by the assured. Oberai is not good law insofar as it construes a Letter of subrogation-cum-assignment, as a pure and simple assignment. But to the extent it holds that an insurer alone cannot file a complaint under the Act, the decision is correct

       Result : Appeal dismissed