Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2008(1) CPR 50(NC)
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION, NEW DELHI
M.B. Shah President; Mrs. Rajyalakshmi Rao and K.S. Gupta, Members
G. Kothainachiar —Petitioner
versus
The Branch Manager, United India Insurance Co. Ltd. and Ors. —Respondents
Revision Petition No. 1503 of 2004
Decided on 29.10.2007

Advocates:
Counsel for the Parties:
For the Petitioner:P.S. Seetharaman, Advocate.
For the Respondent:Kishore Rawat, Advocate.

IMPORTANT POINTS
1. The insurance is a contract between the insured and insurer so the parties are governed by the terms of the contract i.e. terms of the policy. But for the third party, the liability is statutory to pay the amount to the third party victim with liberty to claim refund from the insured on establishing any breach of the terms of policy by him.
2. Claim for reimbursement can be repudiated in case where breach of condition of the policy is fundamental or material.(In case breach is irregular or merely contributory, there is provision for settlement as non-standard claim according to guidelines by GIC).

Headnote:(i) Consumer Protection Act, 1986—Sections 21(b), 2(1)(g) and(o)—Motor Vehicles Act, 1988—Section 84(a)—Carriage Vehicle—Duly insured was having fitness certificate for more than 10 years— Expired before 20 days of the accident—Insured contending that he could not obtain because of ill-health—As per RTO’s report, however, the vehicle was in good condition for plying at the time of accident—The District Forum allowed the complaint granted damage, compensation and cost—In appeal, State Commission reversed and dismissed the complaint holding there was breach of Section 84(a) of Motor Vehicles Act, 1988—Revision against—Whether State Commission was right in its holding?(No)—Case law analysed—Held may be treated as a non-standard claim—Revision allowed—State Commission set aside and that of District Forum restored.
       Held: At the outset, it is to be stated that the 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. (Paras 8, 9, 10 and 11)
       Held Finally: In this view of the matter, the impugned order passed by the State Commission cannot be sustained and is set aside. The order passed by the District Forum is restored.
       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. (Paras 18, 19)
       (ii) Motor Vehicles Act, 1988— Section 149—Liability of Insurance Company—Between the insured and the Insurer Company, parties are governed by the terms of policy(case law ref.)(Para 12)—For the third party, the liability is statutory to pay the amount to the third party victim with the rider to claim refund from insured by establishing the breach of the terms and conditions of insurance policy—(2002) 7 SCC 456(relied on)(Para 13)—But claim for reimbursement can be repudiated in certain cases where the breach of the policy is found fundamental or material and not mere be irregular or just contributory, on evidence and facts—(Case Law Referred). (Para 14)
       Held: 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. (Para 15)
       (iii) Insurance Act—Settlement of non-standard claims and the formula for the same—Motor Vehicles Act, 1988—Guidelines laid down(Paras 16 and 17) 75% of admissible claim is given to the claimant.
       Result: Revision allowed. Order of State Commission is set aside and that of District Forum restored.

ORDER

M.B. Shah, 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 Apex Court.

2. 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:

3 .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.

4. 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.

5. 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 Vehicles Act which requires that vehicle cannot be used without having fitness certificate, the insured is not entitled to have reimbursement from the Insurance Company.

6. 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 regard) of anyone 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 anyone accident as per Motor Vehicles Act, 1958.(sic)

(b) Limit of the amount of the Company’s liability under Section II-1(ii) in respect of anyone claim or series of claims arising out of one event - Rs.6,000.”

7. 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:

8. At the outset, it is to be stated that the 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.

9. 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.

10. 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

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Cases Referred (6)