New India Assurance Co. Ltd. vs C.R. Verma

THE issue for consideration in this revision petition is, as to whether the goods which were not insured as such but were carried in a vehicle which was insured would be covered for indemnification by the Insurance Company under the clause Liability to Third Parties? In other words, whether goods are to be treated as third party in case of an accident of the insured vehicle in which they are carried.

THE issue has cropped up in the following background. Respondent no. 1, complainant before the District Consumer Redressal Forum, Shimla (District Forum for short) purchased some construction material at Chandigarh and entrusted its transportation to his village to respondents no. 2 and 3, who are the owner and driver respectively of the truck in question. En-route some more material was loaded at Solan. THE truck was being driven by respondent 3, when it met with an accident at Kufri on 13th October, 2000 during the currency of the insurance policy. An FIR to this effect was lodged with the local police station. Claim of the owner for the damage to the truck was paid by the Insurance Company as per the terms of the policy. From the records, it appears that the owner of the goods, present respondent no. 1/complainant requested the owner/ driver of the vehicle to make good the loss due to damage to the goods and got a lawyers notice too issued but of no avail. THEreafter, alleging deficiency in service by the opposite parties, which also included the Insurance Company, respondent no.1/complainant filed a consumer complaint before the District Forum. While the respondents no. 2 and 3 were proceeded ex-parte, the present petitioner Insurance Company contested the claims pleading that there was no insurance policy covering the goods and the complaint was not maintainable. It was further contended that there was no privity of contract between the respondent no.1/complainant and the petitioner/Insurance Company. THE District Forum, however, held the opposite parties jointly and severally liable and directed them to pay a sum of Rs.80,594/-, calculated to be the cumulative loss of the material being carried in the truck. When the matter was taken up in appeal before the Himachal Pradesh State Consumer Disputes Redressal Commission, Shimla (State Commission for short) by the petitioner Insurance Company, the State Commission after hearing all the contestants modified the order of the District Forum and held that the petitioner Insurance Company cannot be absolved of its liability to indemnify the loss arising out of damage to goods as well suffered by the complainant who was a third party in the episode. THE State Commission, therefore, foisted the entire liability on the petitioner Insurance Company but gave them the liberty to recover the amount from respondents no. 2 and 3, i.e. transporter and driver, if it has the right to recover this amount from them. Thus the petitioner/Insurance Company was faced with a situation where rather than getting any relief in its appeal filed before the State Commission, it was burdened with the sole responsibility of making good the entire alleged loss of respondent no.1/complainant. Hence, this revision petition.

Learned Counsel for the petitioner Insurance Company has contended that both the fora below have failed to appreciate the pleadings advanced before them by the petitioner/Insurance Company that the goods belonging to third party being carried in the vehicle for transportation did not constitute a third party claim. The exception clause in the policy clearly mentioned that the company shall not be liable in respect of damage to property belonging to or held in trust by or in the custody or control of the insured of the motor vehicle. He has submitted that the liability, if at all, for the damage to the goods being carried in the vehicle would be that of the owner of the truck under insurance. The State Commission further erred in not appreciating that no transit or marine insurance policy was obtained by respondent no.1/complainant nor was insisted upon by the transport agency and the liability which is not covered in the policy has been illegally thrust on the petitioner. He has further placed reliance on the order of the National Commission in the case of Oriental Insurance Company Ltd., vs Badri Prasad Khandelwal and Anr. III (1998) CPJ 32 (NC), wherein under a similar situation, the National Commission has answered in the negative the question as to whether as per terms of the conditions of the policy, the goods carried inside the vehicle could be treated as a property of a third person. Learned Counsel, therefore, submits that both on the facts and on law, the State Commission has totally gone wrong and has fastened the entire liability on the petitioner/Insurance Company. The order of the State Commission, therefore needs to be set aside and the petitioner Insurance Company be absolved of any liability.

LEARNED counsel for respondent no.1/complainant has submitted that the order passed by the fora below are perfectly legal and fully justified. According to him, when Clause 2 under the head Liability to Third Parties clearly stipulates that the Insured shall become legally liable to pay in respect of damage to property caused by the use (including the loading and/or unloading) of the Motor Vehicle, it could not have been held or it could not be claimed that there was any illegality. The District Forum, in its order, has clearly brought out that proviso (d) of the terms & conditions of the insurance policy is in contradiction with Clause 2 stated above, which has not been discussed in the case of Oriental Insurance Co. Ltd. Vs. Badri Prasad Khandelwal & Anr. (supra) and therefore the facts of the case are clearly distinguishable. He, therefore, submits that there is no case of interference at the stage of revision. Learned counsel for respondents no. 2 and 3, the owner and the driver of the vehicle, has submitted that they were proceeded ex-parte before the District Forum without any proper notice on them. This aspect was specifically brought to the notice of the State Commission, requesting for remand of the case for affording them an opportunity to place their case before it. The State Commission, however, failed to consider their request and has proceeded to decide the appeal of the petitioner/Insurance Company, which has again resulted in the miscarriage of justice. He, therefore, submits that the matter be remitted back to the District Forum for affording them an opportunity to place their defence before it.

SINCE respondents no. 2 and 3 in an application filed on 16th of May, 2008 stated that they were never served by the District Forum and the issue had been taken up before the State Commission by filing an application, which the State Commission had failed to consider, we had summoned the records of the lower fora. We have perused the records and notice that the notice issued to respondent Varinder Kumar was correctly addressed at Sector-20C, H.No. 2937, Chandigarh. We say so because even in the affidavit filed with his application before this Commission, respondent Varinder Kumar has stated his address to be the same i.e. Sector 20C, H.No. 2937, Chandigarh. The endorsement on the returned notice by the postal authorities indicates that as many as six attempts were made by the postman to deliver the letter but of no avail and the notice, therefore, was returned to the District Forum. Under the circumstances, the plea of no notice cannot be accepted. Further, respondents no. 2 and 3 had appeared before the State Commission and made their submissions, so it cannot be said that any prejudice has been caused to them. Their plea for remand, therefore, cannot be accepted. Even if there be no specific discussion on the subject by the State Commission, we have given them an opportunity to present their case before us. We have heard learned counsel for the contesting parties and having perused the records of the case, the only point for consideration, as already stated earlier, is to decide as to whether there is any contradiction between the provisions of sub-clause (2) of Clause 1 and proviso (d) under Section II Liability to Third Parties. In order to appreciate these provisions in its correct perspective, it would be useful to reproduce the relevant parts, which state as under :- Section II LIABILITY TO THIRD PARTIES 1. Subject to the limits of liability as laid down in the Schedule hereto the Company will indemnify the Insured in the event of an accident caused by or arising out of the Motor Vehicle against all sum including claimants cost and expenses which the Insured shall become legally liable to pay in respect of (1) . (2) damage to property caused by the use (including the loading and/or unloading) of the Motor Vehicle. PROVIDED ALWAYS that : a. . b. . c. . d. The Company shall not be liable in respect of damage to property belonging to or held in trust by or in the custody of the Insured or a member of the Insureds household or being conveyed by the Motor Vehicle.

A careful reading of sub-clause (2) of clause 1 refers to damage to property caused by the use (including the loading and/or unloading) of the motor vehicle. It means that the Insurance Company will indemnify for damage to property caused by the use of the motor vehicle and when it states including the loading and/or unloading, it is referring only to damage to property not in the vehicle or being carried inside but only to damage of property outside, including in the process of loading and unloading, while proviso (d) clearly excludes the liability of the Insurance Company in respect of damage to property belonging to or held in trust by or in the custody or control of the insured or a member of the insureds household or being carried by the motor vehicle. Thus, to contend that there is any contradiction between these two provisions would not be correct and a harmonious construction of these provisions would mean that the Insurance Company shall not be liable in respect of damage to property being carried or transported by the motor vehicle. That precisely is the import of decision of this Commission in the case of Oriental Insurance Co. Ltd. Vs. Badri Prasad Khandelwal & Anr. (supra). In that case when a tanker loaded with diesel was transported from Jaipur to Lalsot and the vehicle met with an accident resulting from the breaking down of the steering-wheel and there was complete loss of diesel, it was held that as per terms and conditions of the policy, the goods carried inside the vehicle could not be treated as property of a third party and, therefore, the Insurance Company was not liable to indemnify the loss. Besides, as has been correctly pointed out by the learned counsel for the petitioner, respondent no.1/complainant had not insured his goods transported with the petitioner/Insurance Company nor had it obtained any transit/marine policy. He had no privity of contract with the petitioner/Insurance Company. The petitioner/Insurance Company had nothing to do with the goods of the respondent no.1/complainant, which were entrusted to respondents no. 2 and 3 for carriage.

THUS, in our view, both the fora below have been misled to believe that the petitioner/Insurance Company was also liable to indemnify the transported goods. Their findings being untenable, their orders are set aside and the revision petition is accepted, which will mean that it would be the joint liability of respondents no. 2 and 3 to make good the loss of the respondent no.1/complainant. Respondents no. 2 and 3 are directed to pay the awarded amount with interest @ 7% per annum from the date of the complaint till payment and litigation cost of Rs.3500/- within a period of two months.