National Insurance Co. Ltd. vs U.C. DHIMAN

WHETHER the insurers can validly repudiate a motor vehicle insurance claim on the ground that the insured was not the registered owner thereof and had no other disclosed insurable interest therein? This indeed is the solitary significant question in this appeal.

THE material facts are not at all in serious dispute. THE respondent Shri U.C. Dhiman took out an insurance policy for a sum of Rs. one lac for car No. DNC-8164 for a period of one year with effect from the 27th of September, 1989. In the proposal form and the relevant documents, he categorically stated himself as the owner of the car in whose name the same was registered. THE vehicle met with an accident after three months of the date of the insurance policy on the 15th of December, 1989. Inevitably, he lodged a claim, there for and on a surveyor being appointed, the loss was assessed at a sum of Rs. 20550-48 P. only. THE appellants however, repudiated the claim and aggrieved thereby, the respondent had preferred the complaint. On notice being issued, the appellants firmly resisted the complaint. Whilst admitting the factum of the execution of the insurance policy, it was highlighted that at all material times the respondent was not the registered owner of the car at all and infact it stood in the name of one Mr. Gharpure. It was pleaded that the investigation subsequent to the surveyor''s report disclose that it was not till more than six months of the execution of the policy and equally for nearly three months of the happening of the accident that the vehicle was got transferred in the respondent''s name on the 8th of March, 1990. It was pleaded that the respondent had fraudulently held himself put as the registered owner of the car and the insurance contract being one of the utmost good faith stood vitiated by the established false averments in the proposal form. It was further the case that the policy was void, abinitio and in any case the respondent had no insurable interest in the vehicle at the material time and consequently his claim was rightly repudiated.

The parties led evidence in support of their respective cases. The District Forum in appraising the same, took the somewhat curious and untenable view that the question as to who was the registered owner of the vehicle at the time of insurance policy was of no relevance. On that premise, it held that the rejection of the claim on the ground of the absence of an insurable interest and of fraudulent misrepresentation as being the registered owner of the vehicle was of no consequence either. It was observed that having once being duped into accepting the risk, the appellants could not escape their liability and consequently directed the payment of Rs. 20,550:48 P. as relief.

MR. Pardeep Bedi, learned Counsel for the appellant-insurers has forcefully assailed the order under appeal as otherwise cryptic and wholly unsupportable in law. It was argued that by now, it is well settled that the registered owner of a vehicle is alone the owner of the same in the eye of law and he alone can take out an insurance policy with regard thereto. Any other person must establish some other insurable interest in the vehicle, and in any case the fraudulent representation by the respondent that he was the registered owner of the car would vitiate the contract altogether. Reliance was placed on 1982 PLR280 (Full Bench) The Oriental Fire & General Insurance Co. Ltd. v. Bachan Singh and Others, and 1993 CPC 478 Shri Ram Murti of Hissar v. The Oriental Insurance Company Hissar, in support of the appellant''s stand. We are firmly of the view that herein the appeal is concluded in favour of the insurers by precedent and it is, therefore, unnecessary to overly elaborate the matter. Nevertheless it deserves highlighting mat on principle, it is only the owner of a vehicle, who has the primary insurable interest therein. There is no gain-saying the fact that there may be ancillary insurable interest of a financer of the vehicle or in the event of the same being pledged with another. Barring exceptional cases, however which need not to be elaborated exhaustively, it can be safely said that on the larger principle, the lawful owner of the motor vehicle is the primal person having an insurable interest therein and is thus entitled to take am insurance cover, therefor.

THE question as to who in the eye of law is the owner of the motor vehicle, which has to be registered is not merely one of principle, but governed in India by the statutory provisions of the Motor Vehicles Act. This somewhat ticklish question had come up for consideration in Sh. Ram Muri of Hissar''s case (supra) before this Commission. It is unnecessary to tread the same ground again, which was covered in that exhaustive judgment and it suffices to notice the ratio thereof in the following terms: "To conclude on the legal aspect, the answer to the question posed at the very outset is rendered m the affirmative. It is held that Clause 30 of Section 2 of the Act lays down an inflexible presumption that a person in whose name a motor vehicle stands Registered is its owner for the purpose of the insurance of the said vehicle against third party risks or comprehensively." It would be somewhat manifest from the above that within this jurisdiction there is an inflexible, if not an irrebuttable presumption that the person in whose name the motor vehicle is registered is the real owner thereof for the purpose of insurance. Any other person consequently cannot validly lay claim to the legal title thereof as long as the Registration continues to stand in the said person''s name. Consequently, unless some other insurable interest is established no person other than the registered owner can claim to have an insurable interest in the vehicle as its owner. Now once it is so, it necessarily follows that the insurers in the context of an insurance claim with regard to a vehicle can validly insist that either the insured was the registered owner of the vehicle or in the alternative had disclosed and established an insurable interest therein. They would be well within their right, to repudiate the liability, if the insured at the time of taking out the insurance or at the time of the loss is neither the registered owner of the vehicle nor can be establish any other ancillary insurable interest therein.

THE concept of an insurable interest as the foundational base for taking out an insurance policy is too well established to call for any great elaboration in the somewhat summary consumer jurisdiction. It is inherent in the very nature of the contract of insurance that the insured has an insurable interest either in the life or in the property for which he takes out an insurance policy. Put in the negative form, it is equally well settled that a person cannot take out an insurance either in the field of life or general insurance, wherein he has no legal interest whatsoever. THE under-lying principle is well settled and the capability of abuse where insurance may be taken out by persons on the life of another in which they have no interest or equally in the goods or the property of others, in which they would have neither legal title nor any ancillary right, is too manifest to be further dissertated upon. In this context, reference may instructively be made to Chapter II on insurable interest, in the authoritative treaise of Porters Laws of Insurance, IInd Edition. It is unnecessary to make any copious quotations therefrom.

IN all fairness, we must notice what appears to us as a rather curious, but vehement argument of Mr. Adish Gupta for the respondent, it is the vehicle, which is insured, irrespective of the person, who has taken out the policy. We find ourselves unable to subscribe to any such radical proposition. It is somewhat elementary that the insured is the person who takes out the policy and is to be indemnified there under against loss in the goods in which, he must have an insurable interest. The in-animate motor vehicle cannot be raised to the pedestal of an entity separate and apart from the registered owner thereof, who takes out a policy, therefor. Plainly enough, the learned Counsel for the respondent seemed to be inverting the settled INsurance Law and even when pin-pointed, he was unable to cite either precedent or quote chapter or verse for his submission. The argument has, therefore, to be only noticed and rejected. Equally, we are unable to agree with the District Forum''s approach by way of a dictum that the question as to who was the registered owner of the vehicle at the time of the taking out of the insurance policy was of no relevance, nor the question of an insurable interest therein. With respect these issues were crucial to the matter far from being irrelevant. The order under appeal is, therefore, unsustainable as resting on a wholly untenable legal ground.

Without further burdening this order, it seems manifest that the answer to the question posed at the out-set has to be rendered in the affirmative. It is held that the insurer can validly repudiate a vehicle insurance claim on the ground that the insured was not the registered owner thereof or had no other disclosed insurable interest therein.

THE aforesaid ratio would conclude the matter in the appellant''s favour. Once, it is held as above, the appellants for sound reasons had bona fide repudiated the claim. It is well settled by now that in such a situation, it cannot possibly be said that there is a deficiency in the insurance services for which a redress can be given in the consumer jurisdiction. THE appeal is, therefore, bound to succeed on this ground alone. However, the learned Counsel for the appellant was on an equally firm ground that herein the contract of insurance stood vitiated by the patently false, if not fraudulent representation in the proposal form on the basis of which the policy was issued. A reference thereto would show that therein the respondent Shri U.C. Dhiman had categorically stated himself as the owner of the car in whose name it was registered. There was thus a patent falsehood because admittedly at the time, the registered owner of the vehicle was Mr. Gharpure and not the respondent. There was equally a patent suppressio-verie in not disclosing the real registered owner''s name to the insurers.

NOW once it is so as above, the nature of the contract of insurance calls for pointed reference. Since the legal aspect is well settled and borne out by the authoritative precedent of the Full Bench. ''The Oriental Fire & General Insurance Co. Ltd. v. Bachan Singh and Others'' (Supra), to which one of us was a party, it suffices to notice the enunciation of law therein as under: "It is the more so because it is well settled that a contract of insurance is one of uberrima fides. It involves the utmost good faith betwixt the insurer and the insured including within it the obligation of the insured to disclose all material facts to the insurer. This is pithily stated as follows in Colinvaux''s well known work on the Law of Insurance'': ".This is expressed by saying that it is a contract of the utmost good faith uberrime fides. Moreover, this utmost good faith is required not only from the assured but also from the insurer, and the insurer is therefore under a similar duty of disclosure. The doctrine applies equally to all kinds of insurance, including life insurance." It would follow from the above, and indeed it seems to be well settled, that in a contract of insurance, the privity of contract is strictly between the insurer and the insured only and further it is one of the utmost confidence."

It would be somewhat manifest in the light of the aforesaid ratio that in view of the material suppressions and the patent misrepresentations by the respondent with regard to the registered ownership of the car, would vitiate the contract of insurance abinitio. The appellants would thus be fully entitled to absolve themselves from any liability under the same. The repudiation would thus be fully supportable on this alternative ground as well. In the light of the somewhat exhaustive discussion above, the present appeal must succeed and is hereby allowed. We are constrained to set aside the order of the District Forum and to dismiss the complaint preferred by the respondent. Nevertheless, we decline to burden the latter with costs because of his consumer status. Appeal allowed.