ORIENTAL INSURANCE CO. LTD. vs K. Prakashchand And Ors.

THIS revision petition has been filed by the petitioner -insurance company which was opposite party No. 1 before the District Forum against the impugned order dated 29.3.2007 passed by the Karnataka State Consumer Disputes Redressal Commission, Bangalore in Appeal No. 448/2006 whereby the State Commission has dismissed the appeal of the petitioner -insurance company and upheld the order of the District Forum.

BRIEF facts of the case which are relevant for tits disposal are that the complainant, who is respondent No. 1 had financed purchase of the goods vehicle of respondent No. 2/opposite party No. 2. The said vehicle was covered under the comprehensive insurance policy issued by the petitioner company for the period from 8.2.2003 to 7.2.2004. Since respondent No. 2 could not remit the monthly instalment regularly to the complainant/respondent No. 1 on account of the loan availed of by him because of his financial problems, he surrendered the vehicle to the complainant/respondent No. 1 on 13.2.2003. As per the allegation, when the said vehicle was in the custody of respondent No. 1, it was stolen. A complaint therefore, was lodged with the local police on 15.12.2003 which was registered as Cr. No. 175/2003. The Police on investigation having not traced the vehicle filed ''C report before the Local Magistrate. Respondent No. 1/complainant also filed a claim with the petitioner -insurance company. It is averred that respondent No. 1/complainant also agreed to execute a letter of subrogation undertaking for any claim which respondent No. 2 may make in future. However, the insurance company repudiated his claim. Challenging this repudiation as deficiency in service, the complainant/respondent No. 1 filed a complaint before the District Forum which allowed the same with a direction to petitioner/opposite party No. 1 -insurance company to pay Rs. 5,27,850/ - to the complainant/respondent No. 1 within two months. Aggrieved by this order of the District Forum, the petitioner -insurance company challenged the same by filing an appeal before the State Commission which came to be dismissed by the State Commission vide its impugned order which is now under challenge through the present revision petition.

WE have heard learned counsel Shri Vishnu Mehra for the petitioner. Respondent No. 1/complainant has chosen to remain absent on the day of final hearing but its counsel has filed written arguments and also requested that the case may be decided on merits taking into consideration his written submissions. Respondent No. 2 has been proceeded ex parte.

LEARNED counsel for petitioner has submitted that the judgement and order dated 29.3.2007 passed by the State Commission is without jurisdiction and has been passed with material irregularity and hence liable to be set aside. He contended that the State Commission acted with material irregularity in not appreciating that the contract of insurance is between insurer and the insured person and admittedly, in the instant case, the same is between the petitioner -insurance company and the respondent No. 2. Since there is no privity of contract between the petitioner -insurance company and respondent No. 1/complainant, he could not lay a claim against the petitioner -insurance company under the policy. Learned counsel also contended that the registration certificate was never transferred in the name of complainant/respondent No. 1 and even though the complainant has claimed that there was a Hire Purchase Agreement, no such agreement has been produced by him. While acknowledging that there is an endorsement on the insurance policy regarding the Hire Purchase Agreement/Hypothecation in favour of the complainant recorded on the policy on 19.2.2003, i.e., after about 10 days of issuance of the policy which is dated 8.2.2003, the petitioner -insurance company is not a party to the Hire Purchase/Hypothecation Agreement. In view of this, learned counsel contended that the petitioner -insurance company is not bound by such an agreement between the complainant and the insured, if at all there was such an agreement. He also submitted that since the insured person was absconding, the letter of subrogation by the insured could not be executed in favour of the financier/complainant. In view of this, it was contended by the counsel for petitioner that it was wrong on the part of the State Commission to have relied on a mere offer of letter of subrogation by the complainant. Finally, learned counsel contended that the State Commission gravely erred in relying upon IMT -5 and IMT -7 to hold in favour of the complainant/respondent No. 1, even though the policy in question is not subject to these two endorsement. In view of these aspects, he submitted that the impugned order cannot be sustained in the eye of law and is liable to be set aside. We have carefully considered the submissions made by counsel for the petitioner and the written arguments filed by the counsel for respondent No. 1 and have also perused the record. Even though there is an endorsement on the policy regarding the Hire Purchase/Hypothecation/Lease of the vehicle in favour of the complainant/respondent No. 1, it is not under dispute that the petitioner -insurance company is not a party to the terms and conditions of the said Hire Purchase Agreement. Copy of the said agreement has also not been placed on record by the complainant/respondent No. 1 In view of this, we agree with the contention of learned counsel for petitioner that there is no privity of contract between the petitioner -insurance company and the first respondent/ complainant. We also find that although the standard terms and conditions attached to the policy do contain IMT -5 regarding Hire Purchase Agreement and IMT -7 regarding Hypothecation Agreement, since the registration certificate stands in the name of the second respondent/insured, IMT -5 will not be applicable because the complainant/respondent No. 1 cannot claim to be the owner of the vehicle in question. In our considered opinion, IMT -7 will also not be applicable in the absence of the insurance company being made a party to such an agreement. We may note that the endorsement regarding alleged hypothecation of the vehicle in favour of the complainant is vague because it does not clarify as to whether it is an Endorsement in respect of the "Hire Purchase", "Hypothecation" or "Lease". In this view of the matter and more so because the insured person/respondent No. 2 was admittedly absconding, the petitioner -insurance company could not be forced to accept the claim of the complainant on account of the alleged loss of the insured vehicle. It is interesting to note that complainant has not placed on record any document in support of the alleged surrender of the vehicle by the insured to the complainant and also the details of the theft of the vehicle such as the place and date of theft and the date on which information about the theft was conveyed to the insurance company. It also transpires that the letter of subrogation which the complainant has referred to in his communication to the insurance company could not be executed, since admittedly the insured person was reported to be absconding.

UNDER these circumstances, we are of the considered view that the fora below committed grave mistake in admitting the claim of the complainant by applying the terms and conditions contained in IMT -5 and IMT -7. The impugned order, therefore, cannot be sustained and is liable to be set aside. We, therefore, allow the revision petition and set aside the impugned order of fora below. Parties shall bear their own cost.