Vs. M/S. Oriental Insurance Co. Ltd.  INSC 749 (20 May 1996)
M.M.Punchhi, M.M.Paripoornan, K.S.(J) Punchhi, J.
1996 AIR 2054 1996 SCC (4) 647 JT 1996 (6) 32
this appeal by special leave, the question of importance arising therein is
whether the alleged breach of carrying humans in a goods' vehicle more than the
number permitted in terms of the insurance policy, is so fundamental a breach
so as to afford ground to the insurer to eschew liability altogether? Ancillary
to the question is the poser : whether the terms of the policy of insurance
need be construed strictly or be read down to advance the main purpose of the
contract as viewed by this Court in Skandia Insurance Co. Ltd. vs. Kokilaben Chandracadan
& Ors.[1987 2 SCC 654]? The appellant herein was the registered owner of a
'Tara' Truck bearing No. KA-13/3438, duly
insured with the Oriental Insurance Co. Ltd. the respondent herein, vide Policy
dated 24.8.1990 covered for period until 23.8.1991.
policy was comprehensive in nature, covering risk to the limit of Rs. 2,09,000/-.
During the subsistence of the policy, the vehicle of the appellant met with an
accident on 5.8.1991 when, allegedly, a gas tanker came and dashed against the
said vehicle. Apart form the other damage which occasioned due to eh accident,
the appellant's vehicle sustained major damages on account of which repairs
were necessitated. The appellant, therefore, incurred from his necessitated.
The appellant, therefore, incurred form his pocket repair charges/damages to
the tune of Rs.. 87,170/- in order to make the vehicle road-worthy. Pursuant to
such expenditure, the appellant raised a claim with the respondent-Company
inter-alia for reimbursement of the repair charges/damages submitting therewith
the claim-form and the bills for payment. The claim of the appellant was
spurned. The appellant sent a legal notice calling upon the respondent-Company
to make payment to the claim as per the contractual conditions of the policy
but in vain. The appellant then moved the Karnataka State Consumer Redressal
Forum under the Consumer Protection Act, 1986 raising a demand of Rs.
2,13,500/-, diversifying the claim as repair charges, loss of prospective
income, interest, legal notice charges and other miscellaneous expenses.
respondent-Company denied their liability altogether stating that since the
appellant's goods vehicle was used for the purpose of the carrying passengers,
the appellant was disentitled to claim any compensation, and even otherwise
those were nine in numbers. The amount of money spent by the appellant on
repairs however was not seriously disputed as the respondent's Official
Surveyor himself and estimated the repair possibility at Rs.75,700/-.
State Commission went into the matter thoroughly and by its order dated
19.7.1993 allowed the claim of the appellant to the extent of Rs. 75,700/-,
figure at which the Official Surveyor of the respondent Company and estimated
the repair charges, along with the interest at the rate of 18% per annum from
the date of the accident i.e. 5.8.91 till the date of payment. A sum of Rs.
2,000/- also was awarded to the appellant as costs. This order, at the instance
of the respondent as costs. This order, at the instance of the respondent Comp
any, was, however, upset on ap peal on 30.11.1994 by the National Consumer
Disputes Redressal Commission, New Delhi, relying upon the terms of the
insurance policy in taking the view that the policy did not cover use for
carrying passengers in the vehicle except employees [other than the Driver] not
exceeding 6 in numbers, coming under the purview of the Workmen's Compensation
Act, This has culminated into this appeal.
terms of the Insurance Policy, inter alia, provide as follows :
as to use: Only for the carriage of goods within the meaning of the Motor
Vehicles Act, 1988.
policy does not cover –
for organized racing, pace-making reliability trial or speed testing.
whilst drawing a trailer except towing of any one disabled mechanically
for carrying passengers in the vehicle except employees [other than driver] not
exceeding six in numbers coming under the purview of W.C. Act, 1923."
counsel for the appellant, in support of this appeal, strongly relied on Skandia's
case [supra], making a fervent appeal that the terms of the policy afore
referred to, should be read down to carry out the main purposes of the policy
as the presence of 9 persons [when upto 6 were permissible], irrespective of
their being employees or not, had not contributed in any manner to the
occurring of the accident as also when he claim did not relate to any injuries
to those 9 persons (who were owners of the goods loaded) or any loss incurred
by them; the claim pristinely relating to the damage caused to the vehicle
insured, which could not have been denied in the facts and the circumstances.
Strong reliance, in support, was sought from the reasoning of the State
Commissioner which had in so many words said:
for the sake of argument, that 9 persons travelling in the vehicle were
passengers, it cannot be a ground for Insurance Company to repudiate the
contract as the fact of their being passengers or collies does not make any
difference to the risk involved. These persons were in no way concerned with
the cause of the accident not have they contributed to the risk in respect of
the loss caused to the vehicle. The complainant has not claimed any
compensation in respect of his liability to the persons travelling in the
vehicle." It is plain from the terms of the Insurance Policy that the
insured vehicle was entitled to carry 6 workmen, excluding the driver. If those
6 workmen when travelling in the vehicle, are assumed not to have increased any
risk from the point of view of the Insurance Company on occurring of an
accident, how could those added persons be said to have contribute to the
causing of it is the poser, keeping apart the load it was carrying. Here, it is
nobody's case that the driver of the insured vehicle was responsible for the
accident. In fact, it was not disputed that the oncoming vehicle had collided
head-on against the insured vehicle, which resulted in the damage. Merely by
lifting a persons or two, or even three, by the driver or the cleaner of the
vehicle, without the knowledge of owner, cannot be said to be such a
fundamental breach that the owner should, in all events, be denied
indemnification. The misuse of the vehicle was somewhat irregular though, but
not so fundamental in nature so as to put an end to the contract, unless some
factors existed which, by themselves, had gone to contribute to the causing of
the accident. In the instant case, however, we find no such contributory
factor. In Sikand's case this Court paved the way towards reading down the
contractual Clause by observing as follows :
the option is between opting for a view which will relieve the distress and
misery of the victims of accidents or their dependants on the one hand and the
equally plausible view which will reduce the profitability of the insurer in
regard to the occupational hazard undertaken by him by way of business
activity, there is hardly any choice. The Court cannot but opt for the former
view. Even if one were to make a strictly doctrinnaire approach, the very same
conclusion would emerge in obeisance to the doctrine of 'reading down' the
exclusion clause in the light of the 'main purpose' of the provision so that
the 'exclusion clause' highlighted earlier. The effort must be to harmonize the
two instead of allowing the exclusion clause to snipe successfully at the main
purpose. The theory which needs no support is supported by Carter's
"Breach of Contract" vide paragraph 251. To quote :
the general ability of contracting parties to agree to exclusion clauses which
operate to define obligations there exists a rule, usually referred to as the
"main purpose rule", which may limit the application of wise
exclusion clauses defining a promisor's contractual obligations.
example, in Glynnn v. Margetson & Co. [1893 AC 351, 357], Lord Halsbury,
L.C. stated : It seems to me that in construing this document, which is a
contract of carriage between the parties, one must inn the first instance look
at the whole instrument and not at one part of it only. Looking at the whole
instrument, and seeing what one must regard ...... as its main purpose, one
must reject words, indeed whole provisions, if they are inconsistent with what
one assumes to be the main purpose of the contract.
this rule played a role in the development of the doctrine of fundamental
breach, the continued validity of the rule was acknowledged when the doctrine
was rejected by the House of Lords in Suissee Atlantique Societed' Armement
Maritime S.A. v. N.V. Rotterdamsche Kolen Centralel [1967 1 AC 361]. Accordingly,
wide exclusion clauses will be read down to the extent to which they are
inconsistent with the main purpose, or object of the contract." The
National Commission went for the strict construction of the exclusion clause.
The reasoning that the extra passengers being carried in the goods vehicle
could not have contributed, in any manner, to the occurring of the accident,
was barely noticed and rejected sans any plausible account; even when the claim
confining the damage to the vehicle only was limited in nature. We, thus, are
of the view that in accord with the Skandia's case, the aforesaid exclusion
term of the insurance policy must be read down so as to serve the main purpose
of the policy that is indemnify the damage caused to the vehicle, which we
the view above taken, this appeal is allowed, the judgment and order of the
National Consumer Disputes Redressal Commission, New Delhi is set aside and that of the State Commission is restored
in its entirety, but without any order as to costs.