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2010 (2) TMI 1264
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....sks between the period 11.5.1995 and 10.5.1996 in respect of cotton yarn sent by it to various consignees through rail or road against theft, pilferage, non-delivery and/or damage. The first respondent entrusted a consignment of hosiery cotton yarn of the value of Rs. 7,70,948/- to the appellant (also referred to as the `carrier') on 6.10.1995 for transportation and delivery to a consignee at Calcutta. The goods vehicle carrying the said consignment met with an accident and the consignment was completely damaged. On the basis of a surveyor's certificate issued after assessment of the damage, the second respondent settled the claim of the first respondent for Rs. 447,436/- on 9.2.1996. On receiving the payment, the first respondent executed a Letter of Subrogation-cum-Special Power of Attorney in favour of the second respondent on 15.2.1996. Thereafter, respondents 1 and 2 filed a complaint under the Consumer Protection Act, 1986 (`Act' for short) against the appellant before the District Consumer Disputes Redressal Commission, Dindigul, claiming compensation of Rs. 447,436/- with interest at 12% per annum, for deficiency in service, as the damage to the consignment was ....
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....f the Insurer, which was invalid and enforceable. (iv) There was no negligence on the part of its driver and the accident occurred due to circumstances beyond his control. The respondents did not place any evidence to prove any negligence, in spite of appellant's denial of negligence. Having regard to section 14(1)(d) of the Act, liability can be fastened on a carrier, for payment of compensation, only by establishing that the consumer had suffered loss or injury due to the negligence of the carrier as a service provider. In view of the special provision in section 14(1)(d) of the Act, the complainants under the Act were not entitled to rely upon the statutory presumption of negligence available under section 9 of the Carriers Act, 1865 which is available in civil suits brought against carriers. In the absence of proof of negligence, it was not liable to pay compensation for damage to the goods. 5. After leave was granted in this case on 27.9.1999, a three-Judge Bench of this Court rendered its decision in Oberai Forwarding Agency on 1.2.2000, making a distinction between `assignment' and `subrogation'. This Court held that where there is a subrogation simpl....
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....f all the second respondent's rights in respect of the loss but the transfer would be limited to the recovery of the amount paid by the first respondent to the second respondent. Thirdly, the first respondent would not be entitled to take steps to recover the loss in its own name; the steps for recovery would have to be taken in the name of the second respondent. Thus, by the first clause there was an assignment in favour of the first respondent. 21. The second clause, undoubtedly, used the word "subrogate", but it conferred upon the first respondent "the same rights" that the second respondent had "in consequence of or arising from the said loss or damage", which meant that the transfer was not limited to the quantum paid by the first respondent to the second respondent but encompassed all the compensation for the loss. Even by the second clause, therefore, there was an assignment in favour of the first respondent. 22. Learned counsel for the first respondent submitted that the letter of subrogation and the special power of attorney should be read together and, so read, it would be seen that the first respondent was not an assignee of the second respondent....
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....judgment in Oberai Forwarding Agency (supra). But in the earlier judgment in Green Transport Co. vs. New India Assurance Co. Ltd., (1992) 2 CPJ 349 (NC) wherein the insurer had claimed a right of subrogation or transfer of the right of action which the insured had as against the transporter. There it was held that the complaint in the consumer court was not maintainable. In Transport Corporation of India Ltd's case, the National Commission distinguished the judgment in Green Transport Co., wherein the complaint was held not to be maintainable. In other words, this Court in Oberai Forwarding Agency's case (supra) felt that where there was an assignment in addition to subrogation, the complaint was not maintainable even though the original consumer as well as the Insurance Company to whom the rights stood subrogated and assigned were the complainants. The crucial reasoning is set out in paragraphs 23 and 24 of the judgment in Oberai Forwarding Agency (supra) which we have already set out above. So far as paragraph 23 of the said judgment is concerned, it states that in case the right to recover the compensation is assigned to the Insurance Company, there is no questi....
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.... with rights of subrogation would be valid in law because then it will not be a case of a mere assignment of a right to sue. In other words, on the date when the assignment is made, the consignor namely the consumer is still a consumer who has lost his goods and he is entitled to compensation for the loss of the goods by the transport company. Once the consignor receives the money from the Insurance company, the insurance company becomes subrogated as an indemnifier to all the rights of the consumer including the right to sue as a consumer. But the complaint must then be in the name of the consignor. In fact, that is the precise position on Transport Corporation of India Ltd. Vs. Davangere Cotton Mills Ltd. - 1998 (2) CPJ 16. It was held that the consignor could still sue notwithstanding the fact that compensation was paid by the insurance company. The only extra thing that happens in the event of the assignment in favour of the insurance company is that the insurance company becomes entitled to file the complaint in its own name by virtue of the assignment. The insurance company may not be a consumer to start with but it is subrogated to the rights of the consumer (consig....
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.... and to seek the benefit of section 14 of the Limitation Act. There was no other benefit accruing to the transporter. It is contended that a purposeful interpretation is to be given to the provisions of the Consumer Protection Act and one of the purpose is that consumers might get expeditious relief outside the civil courts. It is contended alternatively that looking at the matter from another angle, the insurance company as a third party - indemnifier pays compensation to the consumer and redresses an immediate grievance and makes the insured to go back into this business. In such a situation, merely because a third party indemnifier pays money to the insured, the latter does not cease to be a consumer and the status of the consignor as a consumer still continues. Because there is a breach of contract the consumer can sue for compensation along with the insurance company and does not lose his right to sue for compensation. The right to sue before the consumer court is available either with the consignor or with the consignee and does not vanish into thin air, in spite of the assignor and assignee being co-complainants. In this connection, the decision in Compania Colombia....
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.... or by joining the assured as a co-complainant. (d) Whether relief could be granted in a complaint against the carrier/service provider, in the absence of any proof of negligence? Re : Questions (a) to (c) and the correctness of Oberai 9. A `complaint', in the context of this case, refers to an allegation in writing made by a `consumer' that the services availed of or hired (or agreed to be availed of or hired) suffer from `deficiency' in any respect (vide section 2(c) of the Act). A `consumer' is defined under section 2(d) of the Act, relevant portion of which is extracted below : "Consumer" means any person who - x x x x x (ii) hires or avails of any services for a consideration which has been paid or promised or partly paid any partly promised, or under any system of deferred payment and includes and beneficiary of such services other than the person who hires or avails of the services for consideration paid or promised or partly paid and partly promised, or under any system of deferred payment, when such services are availed of with the approval of the first mentioned person ......." "Deficiency" means any fault, impe....
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.... escape liability for his wrong; (b) No unjust enrichment for the injured, by recovery of compensation for the same loss, from more than one source. The doctrine of subrogation will thus enable the insurer, to step into the shoes of the assured, and enforce the rights and remedies available to the assured. 12. The term `subrogation' in the context of insurance, has been defined in Black's Law Dictionary thus : "The principle under which an insurer that has paid a loss under an insurance policy is entitled to all the rights and remedies belonging to the insured against a third party with respect to any loss covered by the policy." Black's Law Dictionary also extracts two general definitions of `subrogation'. The first is from Dan B. Dobb's Law of Contract (2nd Edn. - # 4.3 at 404) which reads thus : "Subrogation simply means substitution of one person for another; that is, one person is allowed to stand in the shoes of another and assert that person's rights against the defendant. Factually, the case arises because, for some justifiable reason, the subrogation plaintiff has paid a debt owed by the defendant." The second is from Laur....
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....f subrogation is a creature of equity not founded on contract, but arising out of the relations of the parties. In cases of insurance where a third party is liable to make good the loss, the right of subrogation depends upon and is regulated by the broad underlying principle of securing full indemnity to the insured, on the one hand, and on the other of holding him accountable as trustee for any advantage he may obtain over and above compensation for his loss. Being an equitable rights, it partakes of all the ordinary incidents of such rights, one of which is that in administering relief the Court will regard not so much the form as the substance of the transaction. The primary consideration is to see that the insured gets full compensation for the property destroyed and the expenses incurred in making good his loss. The next thing is to see that he holds any surplus for the benefit of the insurance company." In Banque Financiere de la Cite vs. Parc (Battersea) Ltd. [1999 (1) A.C.221], the House of Lords explained the difference between subrogations arising from express or implied agreement of the parties: "....there was no dispute that the doctrine of subrogation in in....
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.... being able to recover more than his actual loss from a third party, an insurer, who had taken an assignment of the assured's rights, would be able to recover the extra money for himself whereas an insurer who was confined to rights of subrogation would have to allow the assured to retain the excess. Another distinction lies in the procedure of enforcing the rights acquired by virtue of the two doctrines. An insurer exercising rights of subrogation against third parties must do so in the name of the assured. An insurer who has taken a legal assignment of his assured's rights under statue should proceed in his own name ..." The difference between subrogation and assignment was highlighted by the Court of Appeals thus in James Nelson & Sons Ltd. Vs. Nelson Line (Liverpool) Ltd. (No.1) - 1906 (2) KB 217 : "The way in which the underwriters come in is only by way of subrogation to the rights of the assured. Their right is not that of assignees of the cause of action; ..... Therefore, they could only be entitled by way of subrogation to the plaintiffs' rights. What is the nature of their right by way of subrogation? It is the right to stand in the shoes ....
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....y virtue of the transfer or assignment in his favour, will be in a position to maintain a suit in his own name against third parties." 14. Subrogation, as an equitable assignment, is inherent, incidental and collateral to a contract of indemnity, which occurs automatically, when the insurer settles the claim under the policy, by reimbursing the entire loss suffered by the assured. It need not be evidenced by any writing. But where the insurer does not settle the claim of the assured fully, by reimbursing the entire loss, there will be no equitable assignment of the claim enabling the insurer to stand in the shoes of the assured, but only a right to recover from the assured, any amount remaining out of the compensation recovered by the assured from the wrongdoer, after the assured fully recovers his loss. To avoid any dispute with the assured as to the right of subrogation and extent of its rights, the insurers usually reduce the terms of subrogation into writing in the form of a Letter of Subrogation which enables and authorizes the insurer to recover the amount settled and paid by the insurer, from the third party wrong-doer as a Subrogee-cum- Attorney. When the insurer obtains....
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....specifying its rights vis-`-vis the assured. The letter of subrogation is a contractual arrangement which crystallizes the rights of the insurer vis-`-vis the assignee. On execution of a letter of subrogation, the insurer becomes entitled to recover in terms of it, a sum not exceeding what was paid by it under the contract of insurance by suing in the name of the assured. Even where the insurer had settled only a part of the loss incurred by the assured, on recovery of the claim from the wrongdoer, the insurer may, if the letter of subrogation so authorizes, first appropriate what it had paid to the assured and pay only the balance, if any, to the assured. 15.3) The third category is where the assured executes a letter of subrogation-cum-assignment enabling the insurer retain the entire amount recovered (even if it is more than what was paid to the assured) and giving an option to sue in the name of the assured or to sue in its own name. In all three types of subrogation, the insurer can sue the wrongdoer in the name of the assured. This means that the insurer requests the assured to file the suit/complaint and has the option of joining as co-plaintiff. Alternatively the insu....
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....ignment of a mere right to sue, will be valid and enforceable. 17. The principles relating to subrogation can therefore be summarized thus : (i) Equitable right of subrogation arises when the insurer settles the claim of the assured, for the entire loss. When there is an equitable subrogation in favour of the insurer, the insurer is allowed to stand in the shoes of the assured and enforce the rights of the assured against the wrong- doer. (ii) Subrogation does not terminate nor puts an end to the right of the assured to sue the wrong-doer and recover the damages for the loss. Subrogation only entitles the insurer to receive back the amount paid to the assured, in terms of the principles of subrogation. (iii) Where the assured executes a Letter of Subrogation, reducing the terms of subrogation, the rights of the insurer vis-`-vis the assured will be governed by the terms of the Letter of Subrogation. (iv) A subrogation enables the insurer to exercise the rights of the assured against third parties in the name of the assured. Consequently, any plaint, complaint or petition for recovery of compensation can be filed in the name of the assured, or ....
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....- in view of the doctrine of subrogation. Where the assured executes a letter of subrogation entitling the insurer to recover Rs. 75,000/- (The suit is filed in the name of the assured or jointly by the assured and insurer). (iv) If the suit is filed for recovery of Rs. 1,00,000/-, and if the court grants Rs. 1,00,000/-, the insurer will take Rs. 75,000/- and the assured will take Rs. 25,000/-. (v) If the insurer sues in the name of the assured for Rs. 75,000/- and recovers Rs. 75,000/-, the insurer will retain the entire sum of Rs. 75,000/- in pursuance of the Letter of Subrogation, even if the assured has not recovered the entire loss of Rs. 1,00,000/-. If the assured wants to recover the balance of the loss of Rs. 25,000/- as he had received only Rs. 75,000/- from the insurer, the assured should ensure that the claim is made against the wrongdoer for the entire sum of Rs. 100,000/- by bearing the proportionate expense. Otherwise the insurer will sue in the name of the assured for only for Rs. 75,000/-. (vi) If the letter of subrogation executed by the assured when the insurer settles the claim of the assured uses the words that the "assured as....
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....or deciding the maintainability of a complaint under the Act. If the complaint is filed by the assured (who is the consumer), or by the assured represented by the insurer as its attorney holder, or by the assured and the insurer jointly as complainants, the complaint will be maintainable, if the presence of insurer is explained as being a subrogee. Whether the amount claimed is the total loss or only the amount for which the claim was settled would make no difference for the maintainability of the complaint, so long as the consumer is the complainant (either personally or represented by its attorney holder) or is a co-complainant along with his subrogee. On the other hand, if the assured (who is the consumer) is not the complainant, and the insurer alone files the complaint in its own name, the complaint will not be maintainable, as the insurer is not a `consumer', nor a person who answers the definition of `complainant' under the Act. The fact that it seeks to recover from the wrongdoer (service provider) only the amount paid to the assured and not any amount in excess of what was paid to the assured will also not make any difference, if the assured - consignor is not the ....
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....ote of the fact that insurance companies, statutory corporations and banks use standardized forms to cover all types of situations and circumstances and several of the clauses in such forms may be wholly inapplicable to the transaction intended to be covered by the document. Necessarily such redundant or inapplicable clauses should be ignored while trying examining the document and make sense out of it. To demonstrate this position, we extract below the letter of subrogation-cum-special power of attorney dated 15.2.1996 executed by the assured in this case, by highlighting the irrelevant clauses by bold letters: "Letter of Subrogation & Special Power of Attorney" To M/s National insurance Co.Ltd., Dindigal In consideration of your paying to us a sum of Rs. 4,47,436.00 (Rupees Four Lakhs Forty Seven Thousand Four Hundred & Thirty Six only) in respect of loss/damage to the under mentioned goods and/or duly payable thereon insured under policy no. 500703/21/24/95/007 issued by National Insurance Co. Ltd., we hereby assign, transfer and abandon to you all our actionable rights, title and interest in and to the said goods and proceeds thereof....
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..../or notices and documents as may be found necessary for the commencement or continuation of proceedings to recover the claim moneys. We further undertake if called upon by you to do so ourselves to institute any such action or proceedings that you may direct on your behalf; it being understood that you are to indemnify us and any other persons whose names may necessarily be used, against any costs, charges or expenses which may be incurred in respect of any action or proceeding that may be taken by virtue of this agreement. The payment received for herein is accepted with the understanding that the said payment shall not enure to the benefit of any carrier or bailees under the provision of any contract of carriage or otherwise; that in making the said payment the underwriter does not waive any rights of subrogation or otherwise against any carrier or bailee and acceptance of this receipt shall not prejudice or take away any rights or remedies which the said underwriter would otherwise have by virtue of such payment. We further agree that any moneys collected from any carrier port authorities or any persons or persons, shall be your property, and if receiv....
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....risation and large legal departments should have enabled insurance companies, banks and financial institutions to (i) improve their documentation processes and omit unnecessary and repetitive clauses; (ii) avoid incorporation of other documents by vague references; and (iii) discontinue pasting or annexing of slips. But that is seldom done. If documents are clear, specific and self-contained, disputes and litigations will be considerably reduced. 23. Let us now consider the decision in Oberai. The assured therein had executed two documents in favour of the insurer, on settlement of the claim. The first was a letter of subrogation and the second was a special power of attorney. The letter of subrogation stated as follows : "In consideration of your paying to us the sum of Rs. 64,137 only in full settlement of our claim for non-delivery/shortage and damage under Policy No. 2142140400015 issued by you all on the under- mentioned goods, we hereby assign, transfer and abandon to you all our rights against the Railway Administration, road transport carriers or other persons whatsoever, caused or arising by reason of the said damage or loss and grant you full power to take and....
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....he insurer to sue in its own name, if read in isolation would amount to an assignment. But if those words are read with the other recitals and the words "in consideration of your paying to us the sum of Rs. 64,137/- only in full settlement of our claim for non-delivery/shortage and damage, under policy issued by you...." make it clear that it was a subrogation-cum-assignment. Further, the second operative portion which states that "we hereby subrogate to you the same rights as we have in consequence of or arising from the said loss or damage" are not words of assignment. When the words used are : "we hereby subrogate to you" and not "we hereby transfer or assign in your favour", having regard to the settled meaning of "subrogate", the said words could not operate as an absolute assignment, but only as an subrogation. The genesis of the document is subrogation. The inclusion of an assignment is an additional right given to the insurer. The document did not cease to be a subrogation by reason of enlargement of subrogation by granting such additional right. In para 22 of the judgment, this Court negatived the contention that the letter of subrogation and the special power of Attorney ....
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....fore answer the questions raised as follows: (a) The insurer, as subrogee, can file a complaint under the Act either in the name of the assured (as his attorney holder) or in the joint names of the assured and the insurer for recovery of the amount due from the service provider. The insurer may also request the assured to sue the wrong doer (service provider). (b) Even if the letter of subrogation executed by the assured in favour of the insurer contains in addition to the words of subrogation, any words of assignment, the complaint would be maintainable so long as the complaint is in the name of the assured and insurer figures in the complaint only as an attorney holder or subrogee of the assured. (c) The insurer cannot in its own name maintain a complaint before a consumer forum under the Act, even if its right is traced to the terms of a Letter of subrogation-cum-assignment executed by the assured. (d) Oberai is not good law insofar as it construes a Letter of subrogation-cum-assignment, as a pure and simple assignment. But to the extent it holds that an insurer alone cannot file a complaint under the Act, the decision is correct. 25. We ma....
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....the carrier is established. The carrier may avoid liability if it establishes that the loss, damage or non- delivery was due to an act of God or circumstances beyond its control. Section 14(1)(d) of the Act does not operate to relieve the carrier against the presumption of negligence created under Section 9 of the Carriers Act. 28. The contention of appellant that the presumption under section 9 of the Carriers Act is available only in suits filed before civil courts and not in other civil proceedings under other Acts, is not tenable. This Court in Patel Roadways Ltd. v. Birla Yamaha Ltd. [2000 (4) SCC 91] has observed: "The principle regarding the liability of a carrier contained in S.9 of Carriers Act namely, that the liability of a carrier is that of an insurer and that in a case of loss or damage to goods entrusted to the carrier the plaintiff need not prove negligence, are applicable in a proceeding before the Consumer Forum. The term "suit" has not been defined in Carriers Act nor it is provided in the said Act that the term `suit' will have the same meaning as in Civil PC. Therefore, the term `suit' has to be understood in its ordinary dictionary meaning.....