ORIENTAL INSURANCE CO. LTD. vs ASHWANI KUMAR

AGGRIEVED by the order dated 22.05.2007 passed by the Punjab State Consumer Disputes Redressal Commission, Chandigarh (for short the ''State Commission '') in appeal No. 1570 of 2004, the Oriental Insurance Co. Ltd., (opposite party in the complaint before the District Forum) has filed the present petition purportedly under Section 21-B of the Consumer Protection Act, 1986 (for short ''the Act ''). The appeal before the State Commission was also filed by the present petitioner-insurance company against the order dated 15.10.2003, by which order the said District Forum had partly allowed the complaint of the complainant and directed the insurance company to pay a sum of Rs. 51,202/- to the complainant with interest @ 9% per annum with effect from 28.04.2001 till payment, besides a cost of Rs. 500/-. By the impugned order, the State Commission has dismissed the appeal and affirmed the order passed by the District Forum, hence this petition.

THE facts and circumstances which led to the filing of the complaint are in a narrow compass. The complainant being owner of the truck bearing registration No. HR-26-A-6407 got the said truck insured from the insurance company for the period from 27.02.2001 to 26.02.2002. Unfortunately, on 28.02.2001, the said truck met with an accident and the surveyor appointed by the insurance company assessed the damage to the truck at Rs. 51,202/- although, according to the complainant he had spent a sum of Rs. 90,000/- on the repairs of the truck. The complainant lodged the claim with the insurance company, which the latter repudiated on the ground that the insured had committed violation of the specific conditions of the insurance policy inasmuch as at the relevant time of the accident, the truck was carrying 54 passengers. The complaint filed was also resisted on the same ground. The fora below held that the repudiation of the insurance claim being on unjustified grounds tantamounts to deficiency in service on the part of the insurance company to settle the claim and therefore, allowed the complaint to the above extent. We have heard Mr. Abhishek Kumar, Advocate learned counsel representing the petitioner-insurance company and Mr. S.M. Suri, learned counsel for the respondent-complainant at length and have given our thoughtful consideration to their submissions. Learned counsel representing the insurance company would assail the concurrent findings and orders passed by the fora below primarily on the ground that the same are not based on the correct and proper appreciation of the facts and circumstances of the case, evidence and material produced on record least on examination of the terms and conditions of the policy and the legal position settled by the Apex court and this Commission in a number of cases. The basis of this submission is that as per the admitted position, the motor vehicle in question i.e. the truck insured is a goods transport vehicle registered as such and having a permit to transport the goods only and by using the said truck, for the purpose of ferrying the passengers numbering as many as 54, the insured had committed gross violation of the provisions of the Motor Vehicles Act, 1988 and also that of the terms and conditions of the insurance policy. In this regard, our attention has been invited to the relevant provisions of the Motor Vehicles Act, 1988 as also the terms and conditions of the insurance policy. In this connection, reference has been made to the ''General Exceptions '' appearing in the policy, which inter-alia states that: "The company shall not be liable under this policy in respect of any accidental loss or damage and/or liability caused sustained or incurred outside the geographical area; Any claim arising out of any contractual liability; (3)a). Any accidental loss damage and / or liability caused sustained or incurred whilst the vehicle insured herein is being used otherwise than in accordance with the ''Limitations as to Use ''. Limitations as to use The policy covers use only under a permit within the meaning of the Motor Vehicle Act, 1988 or such a carriage falling under Sub-section 3 of Section 66 of the Motor Vehicle ''s Act 1988. The Policy does not cover use for (a) Organized racing. (b) Pace Making (c) Reliability Trials (d) Speed Testing. "

IT is submitted by Mr. Abhishek Kumar on behalf of the Insurance Company that the insured vehicle comes under the category of a transport vehicle as defined under section - 2(47) of the Motor Vehicle Act, 1988, which means ''public service vehicle, a goods carriage, an educational institution bus or a private service vehicle. It is further submitted that the Ld. State Commission and District Forum has not considered that a goods carriage vehicle is only meant for carrying goods, for which the requisite permit was granted by the prescribed authority under the Motor Vehicle Act, 1988. It is submitted that the respondent has committed the flagrant violation of the terms of the insurance policy and the breach of Section-88 (11) of the Motor Vehicle Act, 1988 and rules. It was next contended that the fora below have failed to consider that the insured vehicle in question was meant for transportation of goods only for which the insured had obtained a permit from the prescribed authority under the provisions of the Motor Vehicles Act and by putting the insured vehicle to the use of carrying the passengers, the insured has committed flagrant violation of not only the provisions of the Motor Vehicles Act but also the terms of the insurance policy and therefore, disentitled himself for the indemnification of any loss/damage suffered by him on account of damage to the vehicle in the above circumstances.

AS per contra Mr. S.M. Suri, counsel for the respondent-complainant without disputing the factual position about as many as 54 persons being ferried in the truck in question contended that the said persons were not passengers inasmuch as no fare or amount has been charged from them by the insured and the said persons were the relatives and friends of the complainant to whom the complainant taken for a holy pilgrimage to the Shrine of Mata Chintpurni and the accident had taken place on the way and therefore, there was no violation of the terms and conditions of the policy. We consider this argument as fallacious on the face of it because carrying the passengers (Human beings) even without charging any fare or reward in a goods vehicle is by itself is flagrant violation of the provisions of Motor Vehicles Act and the terms and conditions of the policy. It appears to us that the complainant used the goods vehicle i.e. the truck in question as if it was a bus meant to ferry the passengers, which was absolutely prohibited under the law. By doing so, the complainant had not only committed the violation of the law and the terms and conditions of the policy but had also taken a calculated risk of the lives and safety of such large number of persons. The truck in contradistinction to a bus is a different kind of vehicle having no sitting arrangement except for a driver and a cleaner or one or two labour in the front or rear part of the body of the vehicle. A passenger vehicle must conform to various specifications before it can be used for ferrying the passengers. Carrying passengers in a goods vehicle is fraught with high degree of risk and there is no dearth of cases where the goods vehicle carrying passengers have met with serious accidents causing causalities in large number and it must be due to the reason that such vehicles are not at all fit to transport the passengers. Day in and day out we come across with such sights on the road where the goods vehicles are used for transporting the passengers. This becomes rampant, particularly during the certain special occasions like on the eve of elections, fairs and festivities even for organizing dharnas and rallies, that the goods transport vehicles are used for ferrying passengers with impunities, there being no effective checking from concerned authorities of the State. Why this malpractice (menace) is being perpetuated is for the concerned authorities of the Central and State Governments who are invested with the powers to enforce the provisions of the Motor Vehicles Act and the rules framed thereunder. To buttress his submissions that there was gross violation of the provisions of Motor Vehicles Act and that of the conditions of the insurance policy, Mr. Abhishek Kumar seeks support from an order of this Commission dated 03.11.2006 passed in First appeal No. 166 of 2003. In that case, the insurance company repudiated the insurance claim on the ground that as many as 35-36 passengers were carried in the insured vehicle as against the sitting capacity of 19 persons. This Commission, going by the provisions of the Motor Vehicle Act and the conditions of the insurance policy had taken the view that if there is a flagrant violation of the terms of the policy, the insurance company cannot be directed to settle and reimburse the complainant even on non-standard basis by observing as under: "It is true that as per the permit issued under Motor Vehicles Act by the Regional Transport Officer, Dharwad, the sitting capacity for the vehicle was 19 in all. Even if we take that the complainant was entitled to carry 17 passengers one driver and one conductor then also the breach of the terms of policy would be with regard to limitation as to use. Because, in the Mini bus having capacity to carry 17 passengers + 1 driver and one conductor, 35-36 passengers were being carried. This would have its own adverse effect in driving the vehicles. That too, in the dead of night, the driver may lose control at any point of time. As per the judgment of the M.A.C.T. one of the witnesses stated that the mini bus was driving very fast and recklessly and it dashed behind the vehicle which was parked on the road side. Hence, it cannot be said that such breach of the conditions of the policy and the permit could not be one of the causes for the accident. Therefore, the decision relied upon by the State Commission in the case of B.V. Nagaraju V. Oriental Insurance Company Ltd. (1996) 4 SCC 647, would have no bearing in the facts of the case because in that case only 2 to 3 more passengers were carried in a goods vehicle. In this view of the matter ?i) there is a gross violation of the terms of the policy; and (ii) the provisions of the Law. Hence, in such a situation, the Insurance Company has no alternative but to repudiate the claim as there is gross violation of the terms of the contract. In the result, the Appeal is allowed. Impugned order passed by the State Commission is set aside. There shall be no order as to costs. "

MR . Suri contended that even if there was violation of the terms and conditions of the policy, the petitioner-insurance company ought to have settled the claim of the complainant on non-standard basis in terms of the guidelines issued by the General Insurance Corporation of India dated 20.10.2000, which we would like to extract herein below: "General Insurance Corporation of India Guidelines for assisting disposal of compromised claims In processing claims the companies come across cases where for various reasons they find that the claims cannot be treated as standard. Some examples of such reasons are: a. Breach of policy condition(s)/warranty (ies); b. Noncompliance of tariff provisions; c. Charging of incorrect premium on account of other misrepresentations or mis-declaration or non-disclosure by the insured; d. Jeopardized rights of recovery from third parties, specially under a Marine Policy. The above list is not exhaustive and there may be various other reasons as well where the breach, non-compliance,, misrepresentation or lapse of any kind is such that technically the company can repudiate liability but on the merits of the case the company is of the view that the claim should be considered, the case may be disposed of on the following basis: (a) Where the breach, non-compliance mis-representation or lapse of any kind is not material to the loss, settlement may be considered after rectification of the policy. When additional premium for rectification of policy will no doubt be collected whatever required, deduction of any further amount from the ceased claim will be as per internal instructions if any, issued by the Company. (b) Where the breach, non-compliance, misrepresentation or lapse of any kind is material to the loss, settlement up to a maximum of 75% of the assessed claim may be considered. The decision to deduct 25% or more will depend upon the nature of the lapse. (c) For jeopardized recovery right an appropriate amount representing the possible recovery - had the recovery right been protected - may be deducted from the assessed claim. GIC/TECH/1133-A-2 20 October, 2000 "

MR . Abhishek Kumar on the other hand contended that the said guidelines are no longer in vogue and each General Insurance Company have issued its own guidelines for settling the claim on non-standard basis in certain circumstances. Despite opportunities granted to the petitioner no such guidelines were brought on record. He contended that the violation of the terms and conditions of the policy were so flagrant and gross in the case in hand that there is no question the claim being settled on non-standard basis. We find force in this contention because an insurer has the right and discretion to settle the claim of an insured going by the facts and circumstances of each individual case, and the nature and extent of the violation of the policy conditions / warranty (ies). The question as to when an insurer should settle the claim on non-standard basis has been considered by the Hon ''ble Supreme Court in the case of Amalendu Sahoo Vs. Oriental Insurance Co. Ltd. 2010 (1) CPC 653 SC and answered in the following manner: "In this connection reference may be made to a decision of National Commission in the case of New India Assurance Company Limited Vs. Narayan Prasad Appaprasad Pathak reported in (2006) CPJ 144 (NC). In that case also the question was, whether the insurance company can repudiate the claims in a case where the vehicle carrying passengers and the driver did not have a proper driving licence and met with an accident. While granting claim on non-standard basis, the National Commission set out in its judgment the guidelines issued by the insurance company about settling all such non-standard claims. The said guidelines are set out below: Sr. No. Description Percentage of settlement (i) Under declaration of licensed carrying capacity Deduct 3 years '' difference in premium from the amount of claim or deduct 25% of claim amount, which is higher. (ii) Overloading of vehicles beyond licensed carrying capacity Pay claims not exceeding 75% of admissible claim. (iii) Any other breach of warranty/condition of policy including limitation as to use Pay up to 75% of admissible claim. From a perusal of the aforesaid guidelines, it is clear that one of cases where 75% claim of the admissible claim was settled was where condition of policy including limitation as to use was breached. "

The facts and circumstances of the said case were altogether different inasmuch as their insurance claim was repudiated by the insurance company on the ground that the insured vehicle in question was used for hire or reward which was contrary to the terms and conditions of the policy as the vehicle was registered as a private vehicle. The violation in the present case is so flagrant and gross that the insurer cannot be called upon to settle the claim even on non-standard basis. Doing so would amount to according premium to the insured for flagrant violation not only of the terms and conditions of the policy, but of the penal offence committed by the complainant under the provisions of Motor Vehicle Act, 1988.

HAVING considered the matter from different angles, we are of the considered view that both the fora below have misdirected themselves and have committed grave error in law by allowing the complaint by directing the insurance company to pay the compensation to the above extent. The orders are legally unsustainable and deserve to be set aside.

IN the result, the Revision Petition is allowed and the impugned orders passed by the fora below are hereby set aside and consequently the complaint is dismissed. No order as to costs. Revision Petition allowed.