New India Assurance Co. Ltd vs J&K Consumer Protection Comm And Others

Rahul Bharti, J

Heard learned counsel for the parties and perused the pleadings and the record.

This is a writ petition of year 2005 filed by the petitioner–New India Assurance Co. Ltd., to salvage stakes of an amount of Rs.27,125, being 25% deduction on non-standard claim basis vis-à-vis an insurance claim amount of Rs.1,08,500/- ordered to be payable in favour of the insured i.e., the respondent no. 3 by the Jammu & Kashmir State Consumers Protection Commission in terms of its judgement dated 18.01.2005. Whether this litigious venture was worth taking or not was a call of an administrative prudence which ought to have been taken at the end of the petitioner upon which this Court refrains from commenting except to observe that perhaps cumulative expense in terms of money, time and energy including time consumption of this court as has over run the amount at stake but this court is hastening, being duty bound, to proceed and deal with the case on merits lest any further postponement compounds costs factor. The only redeeming feature of this case worth an adjudicatory exercise is that it affords us to refresh the position of law obtaining with respect to an exclusion clause in an insurance policy in terms whereof settlement of insurance claims on non-standard basis come to take place.

The respondent no. 3, namely, Mohd. Iqbal had taken out an insurance of vehicle which being a passenger bus bearing registration no. JKQ-6265. The insurance was availed from the petitioner–New India Assurance Co. Ltd., in terms of a policy no. 31/64966 covering the risk period from 27.08.1995 to the mid-night of 26.08.1996. The respondent no. 3 had paid the insurance premium of an amount of Rs.7,650/- for covering not only 3rd party risk but also own damage. The insured value of the vehicle was taken to be Rs.2 lacs.

On the last date of insurance i.e. 26.08.1996, the insured bus JKQ 6265 met with an accident near Kotian, when it was on its way from Rajouri to Mendhar skidding off the road to fall into a gorge resulting in loss of life of 12 passengers, including the driver of the bus as well, besides causing substantial damage to the insured bus. This accident had resulted in registration of FIR no. 191 of 1996 dated 26.08.1996 under section 279, 337, 338 of the Ranbir Penal Code (RPC) with the Police Station Poonch and the investigation resulted in a police closure report no. 74 dated 23.12.1996.

In order to earn indemnification of his loss on account of damage caused to the insured bus, the respondent no. 3 came to register an insurance claim with the petitioner which resulted in an exercise in the form of appointment of a surveyor, investigator, inspection, reports, exchange of the communications, intra-office correspondence at the end of the petitioner with a final outcome in the form of a communication dated 20.03.2021 from the end of the petitioner to the respondent no. 3 apprising him thereby that his claim has been repudiated by the competent authority.

Feeling aggrieved of deficiency of service at the end of the petitioner in the matter of settlement of his legitimate insurance claim, the respondent no. 3 came to file a consumer complaint no.792 of 2021 under the Jammu & Kashmir Consumer Protection Act, 1987 on 28.08.2021 before the Divisional Consumer Forum, Jammu, thereby asking for the claim of payment of Rs.2 lacs along with interest @ 12% from the date of loss and an amount of Rs.50,000/- as compensation for deficiency of service on the part of the petitioner.

The petitioner appeared to contest the case of the respondent no. 3 before the Divisional Consumer Forum, Jammu wherein the petitioner disclosed about the course of action at its end and the basis for repudiating the claim of the respondent no.3. In its reply-cum-objections to the compliant of the respondent no. 3, the petitioner referred to the fact that the final surveyor Mr. S. B. Bakshi deputed in the case had come to submit an investigation report dated 09.06.2000, thereby recommending to settle the loss on non-standard at Rs.1,33,875/- in the light of the fact that the earlier assessment of loss done by surveyor M/s Elite Surveyor was stated to be Rs.1,78,500/- out of which deduction of salvage value of Rs.70,000/- actually brought the net liability of the loss to Rs.1,08,500/-.

In its reply-cum-objections to the averments made by the respondent no. 3 in his compliant about the cause of accident being slipping of the bus off the road while giving a pass to an army vehicle, the petitioner referred the cause of accident to be rash and negligent act of driving on the part of the driver and also to an overloading of passengers more than 56 as against the prescribed capacity of 42 + 2 passengers in the vehicle.

Before the Divisional Consumer Forum, Jammu, the respondent no. 3 along with his complaint had produced in addition to other documents a certificate of insurance with respect to the insured bus, whereas the petitioner come forward to produce the relevant correspondence/ communication/reports/surveyors’ report/ but without production of the insurance policy subscribed between the petitioner and the respondent no. 3. Thus, the Divisional Consumer Forum, Jammu did not have the insurance policy before it when it came to the matter of final adjudication of the consumer complaint of the respondent no. 3.

The Divisional Consumer Forum, Jammu came to hold that the cause of accident was loss of balance while the driver of the insured bus was negotiating a pass to an army vehicle which resulted in slipping of the ill-fated bus to suffer fall in the gorge. The Divisional Consumer Forum, Jammu ruled out the negligence on the part of the driver of the insured bus. The Divisional Consumer Forum, Jammu registered its observation that the petitioner had not produced for the notice of the Divisional Consumer Forum, Jammu the exclusion clause which was being sought to be exploited by the petitioner to disentitle the claim for insurance money of the respondent no. 3 on account of the alleged fact that it was because of carrying of more passengers in the insured bus then permissible which resulted in causing the accident. The Divisional Consumer Forum, Jammu, vide its award dated 28.08.2021, came to hold the assessment of loss of insured buss to the tune of Rs.1,78,500/- with salvage value of Rs.70,000/-thereby bringing the net liability to an amount of Rs.1,08,500/- and directed the petitioner to consider the case and decide it on the basis of non-standard claim by making 75 % of the amount assessed by the surveyor as payable to the respondent no. 3 along with costs of the case at Rs.1,000/-. The payment of the entire amount was directed to be given within a period of six weeks, in default where of interest @ 9 % p.a. calculable 3 months after the date of accident to attend the payment of the entire amount in favour of the respondent no. 3.

This award dated 28.08.2021 of the Divisional Consumer Forum Jammu was not put to any challenge in an appeal by the petitioner, whereas the respondent no. 3 had felt aggrieved of the settlement of his claim so directed by the Divisional Consumer Forum, Jammu on non-standard basis as a result whereof 75% of the net liability amount of Rs.1,08,500/- was to be payable to the respondent no. 3. Thus, the respondent no. 3 came forward with a statutory appeal under the Jammu & Kashmir Consumer Protection Act, 1987 before the respondent no. 1 i.e., Jammu & Kashmir State Consumers Protection Commission.

The J&K State Consumers Protection Commission, vide its judgement dated 18.01.2005, came to hold that the Divisional Consumer Forum, Jammu had not given any ground for deducting 25%, which made the direction of the Divisional Consumer Forum, Jammu to the extent of deduction as being arbitrary & without any rhyme or reason and held the respondent no. 3 to be entitled to payment of entire net liability amount of Rs.1,08,500/- with interest @ 6% p.a. from three months after the date of M/s Elite Surveyor’s report dated 08.01.1997. Thus, as per the award of the Divisional Consumer Forum, Jammu, amount payable to the respondent no. 3 by the petitioner was 25% less of the amount of Rs.1,08.500/- which comes to be Rs.21,375/-, whereas as per the J&K State Consumers Protection Commission the petitioner was meant to pay without any deduction the amount of Rs.1,08,500/- to the respondent no. 3. It is against this much difference of amount of liability that the petitioner considered it worth to invest time, energy and costs at its end to come forward with the present writ petition before this Court filed on 10.08.2005 which kept burdening the docket of this Court for more than 18 years of its pendency.

As the moot point involved in the case rests upon the J&K State Consumers Protection Commission displacing the non-standard component of the award of the Divisional Consumer Forum, Jammu as such, before we proceed to examine the award of the Divisional Consumer Forum, Jammu and also of the judgement of the J&K State Consumers Protection Commission, we need to take into perspective the basis of holding the insurance claim payable on non-standard claim basis.

As per Black’s Law Dictionary an Insurance is a contract whereby, for a stipulated consideration, one party undertakes to compensate the other for loss on a specified subject by specified perils. The party agreeing to make the compensation is usually called the “insurer” or “underwriter;” the other, the “insured” or “assured;” the agreed consideration, the “premium;” the written contract, a “policy;” the events insured against are known as “risks” or “perils;” and the subject, right, or interest to be protected, the “insurable interest.” In broader aspect, in terms of its types, Insurance deals with property, liability and life. Invariably, by its very nature a contract of insurance has an exclusion clause which in fact is a provision which eliminates coverage where were it not for exclusion, coverage would have existed or in other words as explained in the Black’s Law Dictionary provision in the policy specifying the situation, occurrences or the persons not covered by the policy. This particular provision in an agreement of insurance between the insured and insurer is known as an “Exclusion Clause.” It is with respect to this clause that the concept of standard and/or non-standard claims is rooted to.

The exclusion clause has received deliberation and interpretation which has now become well known and settled from the pronouncements of the Hon’ble Supreme Court of India to which we need to delve to bear out the correct understanding so as to deal with the contentions raised in the present case .

First reference come to the case of “B. V. Nagaraju Vs Oriental Insurance Co. Ltd., Divisional Office, Hassan” (1996 AIR SC 2054), in which the Hon’ble Supreme Court dealt with the intendment, import and importance of an exclusion clause in an insurance contract. In this case the registered owner of a Tata truck had got it insured with the Oriental Insurance Co. Ltd. under a comprehensive insurance policy. Said insured vehicle had met with an accident during the tenure of its insurance which damaged the insured vehicle for repairing which the owner/insured had paid from his pocket an amount of Rs.87,117/- to restore the insured vehicle to its use and run. For the amount so spent, the owners/insured raised a claim for reimbursement of the repair expense which came to be declined, resulting in filing of a consumer case before the Karnataka State Consumer Redressal Forum. In response to this, the insurer-Oriental Insurance Co. Ltd. denied its liability upon the plea that the insured vehicle was used for the purpose of carrying passenger which otherwise was a goods vehicle and as such was not entitled to any claim under the insurance policy. The claim of the owner/insured was allowed by the State Consumer Commission but upon being challenged before the National Consumer Disputes Redressal Commission, New Delhi came to be upset on the point that insurance policy did not cover use for carrying passengers in the insured vehicle and the matter got landed in an appeal before the Hon’ble Supreme Court of India. The insurer-Oriental Insurance Co. Ltd., had succeeded on the point that the breach of condition of the policy in use of the insured bus had relieved it from its liability and from its obligation to indemnify the loss of the owner/insured. The Hon’ble Supreme Court of India came to examine the case from a poser that whether the carrying of few passengers in the insured gods vehicle be said to have contributed to the causing of an accident so as to result in a breach of an essential condition of the insurance policy to relieve the insurer from its contractual obligations to indemnify to pay insurance to the owner/insured and came to hold that the National Consumer Disputes Redressal Commission, New Delhi had gone for strict construction of the exclusion clause by omitting to notice that extra passengers being carried in the goods vehicle could not have contributed in any manner to the occurring of the accident, even when the claim confining the damage to the vehicle was limited in nature. The Hon’ble Supreme Court of India by referring to the case of “Skandia Insurance Co. Ltd. Vs Kokilaben Chandravdan and others” (1987 AIR SC 1184) came to accord with the proposition of law settled in the said case to hold that exclusion term of an insurance policy must be read down so as to serve the main purpose of the policy i.e. indemnify the damage caused to the vehicle and thus, the Hon’ble Supreme Court of India allowed the claim of owner/insured.

In the case of “National Insurance Company Ltd. Vs Nitin Khandelwal” (2008 (Supp.) AIR SC 1166) the fact position was that the owner of a private vehicle had availed an insurance from the National Insurance Company Ltd., and which in the course of its use for bringing the children of the insured from the Jaipur came to be stolen by some persons by dumping the driver on the way resulting in loss of the vehicle by theft thereby generating an insurance claim which came to be rejected by the insurance company on the plea that the insured vehicle was insured for personal use but was being used by the owner/insured as Taxi thereby violating the terms of the insurance policy inviting the rejection of the claim. The owner/insured, as an aggrieved consumer, filed a consumer complaint before the District Forum Gwalior which upheld the contention of the insurance company of violation of terms and conditions of the insurance policy justifying the rejection of the claim. In an appeal before the State Consumer Commission, the decision of National Consumer Disputes Redressal Commission in “United India Insurance Company Ltd. Vs Gian Singh” [(2006 CTJ 221(CP) NCDRC)] in which it was held that in the case of violation of a policy as to the nature of use of the vehicle, the claim ought to be settled on non-standard basis, and thus, the State Commission in this case held the owner/insured entitled to settlement of his claim on non-standard basis to the 75% of the sum insured. The National Consumer Disputes Redressal Commission upheld the judgment of the State Commission which resulted in the matter coming before the Hon’ble Supreme Court of India, in which reference came to be made to the case of “Jitendra Kumar Vs Oriental Insurance Company Ltd.” (2003(6) SCC 420) reiterating the question as to can an insurance company repudiate a claim made by the owner of the vehicle duly insured solely on the ground that the driver of the vehicle who had nothing to do with the accident was not holding a valid driving licence. By borrowing the principle settled in the said case in the context of the nature of the breach of condition in co-relation to the actual event taking place vis-à-vis insured event/incident, the Hon’ble Supreme Court of India came to hold that the nature of use of the vehicle was not to be looked into with respect to the incident of its theft and consequent loss, and as such the Insurance company could not have repudiated the claim on that basis and was to settle it on non-standard basis.

In the case of “Amalendu Sahoo Vs Oriental Insurance Co. Ltd.” (2010 AIR SC 2090), the owner/insured had taken a comprehensive insurance policy with respect to a vehicle which met with an accident during the subsistence of the policy but the claim for insurance came to be negated on the plea that the insured vehicle was not used for personal use but was used on hire as a result whereof the insured had indulged in the breach of terms of the insurance policy entitling the insurance company to exercise its right to repudiate the claim of the insured. In the case, the Hon’ble Supreme Court of India came to refer to a decision of National Consumer Disputes Redressal Commission in the case of “United India Insurance Company Ltd. Vs Gian Singh” [(2006 CTJ 221(CP) NCDRC)] in which it has come to be held that in case of violation of condition of the policy as to the nature of use of the insured vehicle, a claim ought to be settled on non-standard basis. This decision of National Consumer Disputes Redressal Commission was referred for reliance by the Hon’ble Supreme Court of India in the case of National Insurance Company Ltd., Vs Nitin Khandelwal 2008(7) SCALE 351. In Amalendu Sahoo’s case supra, the Hon’ble Supreme Court of India came to make a reference to the decision of the National Consumer Disputes Redressal Commission in the case of “New India Assurance Co. Ltd. Vs Narayan Prasad Appaprasad Pathak” (2006 CPJ 144 NC) wherein the guidelines issued by the insurance company about the non-standard claims came to be referred.

In the case of “Lakhmi Chand Vs Reliance General Insurance,” (2016 AIR SC 315), the case had also originated from consumer foras’ adjudication. In this case, the owner of an insured goods vehicle had lodged an insurance claim for the damage caused to the insured vehicle in an accident on account of rash and negligent driving of the offending vehicle . For repair of damaged vehicle, the owner-insured spent an amount of Rs. 1,64,033/- whereas the Insurance Company deputed a surveyor assessed Rs. 90,000/- as loss. The insurance claim was rejected on the point that the insured vehicle had allowed five persons as passengers to travel in it as against it being a goods carrying vehicle . The District Consumer Forum came to direct the Insurance Company to settle the claim of the owner-insured on non-standard basis upto 75% of the amount spent on repair of the insured vehicle. In appeal, the State Commission came to upset the District Forum adjudication. National Commission too came to uphold the State Commission’s judgment on the basis that carrying of six passengers in the goods carrying vehicle was a violation of terms and conditions of the insurance policy. Matter thus reached the Hon’ble Apex Court wherein it came to be held that the National Commission had not taken into consideration the judgment in the case of B.V.Nagaraju Vs Oriental Insurance Co.Ltd., 1996 AIR SC 2054 in which it is held that for an insurer to avoid its liability the breach of the insurance policy must be so fundamental in nature that it brings the insurance contract to an end, and in the instant case the accident was not proved to have been caused by the overloading of passengers in the goods carrying vehicle . The District Forum’s adjudication was restored in favour of the owner-insured.

In the case of “Manjeet Singh Vs National Insurance Co. Ltd.,” (2017 AIR SC 5795), theft of an insured vehicle Tata Open Truck driving which its driver had given lift to some persons on their request came to take place at the hands of said disguised passengers. Giving of lift to the passengers by the driver of the insured vehicle was taken to be a policy condition violation to repudiate the insurance claim which was upheld by the District Forum against the owner-insured whose appeal before the State Commission also failed and even revision before the National Commission failed to earn the relief in favour of the owner-insured. The Hon’ble Supreme Court of India found fault in the basic judgment of the District Forum in not appreciating that violation of the condition of policy should be such a fundamental breach so that claimant can not claim any amount whatsoever. Carrying of passengers was held to be a violation of not such a nature so as to constitute a fundamental breach . The claim was directed to be settled on non-standard claim basis to be settled at 75%.

Thus, non-standard claim basis is a legal concept whereby the breach of the terms and conditions of an insurance policy are not read to be holding an insured disentitled to insurance claim for the risk or the loss occurred to him when the contributory cause of the risk or loss is not coming forth from the fundamental term & condition per se which has been incorporated in the exclusion clause.

Now, coming to the present case, we have no iota of hesitation in holding that the Divisional Consumer Forum, Jammu and also the Jammu & Kashmir State Consumers Protection Commission fell in error, though in a different manner, in the matter of passing judgement/award at their respective end. The Divisional Commissioner Forum, Jammu came to direct the petitioner to pay the claim of the respondent no. 3 on non-standard basis without first there being any insurance policy as obtaining between the petitioner and the respondent no. 3 exhibited before it and as such, there was no reason for the Divisional Consumer Forum, Jammu to speculate as to the presence and nature of an exclusion between the petitioner and the respondent no. 3. From the record of the Divisional Consumer Forum, Jammu, it is gatherable that no insurance policy signed and subscribed between the petitioner and the respondent no. 3 is finding its presence there except the certificate of insurance that too produced by the respondent no. 3. Thus, the Divisional Consumer Forum, Jammu while holding the respondent no. 3 ought to have ignored any reference to exclusion clause and then pressing into effect the direction for settlement of the claim on non-standard basis. The direction to settle the claim on non-standard basis could have come only in presence of an exclusion clause at first instance, examining its nature and limit and thus holding the settlement of claim on non-standard basis. In this case, the cause of the accident met by the ill-fated insured bus is not related or relatable to any terms &conditions of the contract of insurance where as the fact is that the Divisional Consumer Forum, Jammu accepted the cause of accident to be skidding of the road while giving a pass to the army vehicle and, therefore, in the said happening so taking place there was no breach of term and condition of the insurance policy. The petitioner had not brought any evidence on record to prove that the insured bus was carrying more than prescribed passengers for the journey and there was an act of rash and negligent driving on the part of the driver of the insured bus both being violation of fundamental nature to absolve the petitioner of its liability to indemnify . Only bald averments in its reply/objections were not to suffice for prima-facie proof of the said averred fact and thus the Divisional Forum while coming right to hold the petitioner liable to indemnify the respondent no. 3 misstepped in its direction for settling the claim on non standard claim basis just by the bald averment of the petitioner in its reply. .

Thus, we hold that the Divisional Consumer Forum, Jammu erred in subjecting the claim of the respondent no. 3 to suffer deduction of 25% and settlement at 75% of total loss amount of Rs.1,08,500/- payable to the respondent no. 3.

On the other hand, the Jammu & Kashmir State Consumer Protection Commission, in its appellate jurisdiction, fell in error of law in the matter of carrying correct understanding of position of law as to the basis upon which the Divisional Consumer Forum, Jammu had directed the settlement of claim of the respondent no. 3 on non-standard basis. A reading of the judgement of the Jammu & Kashmir State Consumer Protection Commission manifests that it read the award of the Divisional Consumer Forum, Jammu in the context of granting the settlement of the claim of the respondent no. 3 @ 75% of the assessed amount of loss of Rs.1,08,500/- as without any rhyme or reason, whereas the purported basis used by the Divisional Consumer Forum, Jammu by reference to it being a non-standard claim was so called exclusion clause. Now, whether that inference and basis of the Divisional Forum Jammu was unwarranted or misconceived ought to have been put to consideration by the Jammu & Kashmir State Consumer Protection Commission but the State Commission fell in omission to carry out the adjudication in that manner though reached to a conclusion to which we have reached that the Divisional Consumer Forum, Jammu ought not to have subjected the claim of the respondent no. 3 to deduction of 25% and it settlement at 75% of the net liability amount of Rs.1,08,500/-.

We, therefore, uphold the conclusion of the Jammu & Kashmir State Consumer Protection Commission in its judgement but dispense with its reasoning and hold the petitioner as liable to indemnify the respondent no. 3 for an amount of Rs.1,08,500/- along with interest as ordered by the Jammu & Kashmir State Consumer Protection Commission. In the light of this, the writ petition is accordingly disposed of.