Sahu Vs. Oriental Insurance Co.Ltd.  INSC 217 (25 March 2010)
SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO.2703 OF
2010 (Arising out of SLP(C) No.11227/2009) Amalendu Sahoo ..Appellant(s) Versus
Oriental Insurance Co. Ltd. ..Respondent(s)
This appeal has been filed challenging the judgment and order
dated 13.10.2008 of the National Consumer Disputes Redressal Commission
(hereinafter, `National Commission') which upheld the concurrent finding of the
District and State Consumer Forums that the car at the 1 time of the accident
was being driven on hire and was outside the scope of the insurance policy.
The appellant who is the original complainant had taken a
comprehensive insurance policy in respect of his private car being No.
WB-34C/1919 vide policy No.311701/3/99/7172 of 1999 and the complainant paid
the insurance premium duly.
As per the complainant, United Bank of India's regional office is
his tenant and many of its employees are known to him. One of its employees had
approached the complainant to hand over the aforesaid vehicle for a few hours
for urgent use by the employees of the Bank. The complainant handed the
aforesaid vehicle by way of a good gesture and did not take any rent from the
Bank in this regard. The vehicle met with an accident during the subsistence of
The complainant had lodged a claim before the respondent but it
refused to allow the claim 2 inter alia on the ground that the vehicle was
given on hire and as per the policy terms such use was not permitted and the
insured was not entitled to any compensation for such unauthorised use.
The District Forum vide its order dated 19.06.2003 dismissed the
claim of the complainant after going through the policy. The Forum held that
there is a clear condition as to the mode of use of the insured vehicle. The
policy was not applicable in case of use of the vehicle for hire, reward or
organized racing speed testing and carriage of goods in connection with any
trade or business by any third party. Reliance was placed on the report of the
office-in-charge of the police station according to which the accident occurred
because of the negligence of the driver who had a valid driving licence. Even
though no payment was proved, the Forum held that the use of private car without
payment of charges could not be imagined. It was coupled with the fact that the
Bank Manager of the aforesaid Bank was not 3 examined as a witness by the
complainant. The report of the surveyor was that the vehicle was given on a
hire basis. However, that report was apparently prepared ex-parte.
Aggrieved by the aforesaid order, the complainant preferred an
appeal to the State Consumer Disputes Redressal Commission which vide its order
dated 16.01.2004 dismissed the appeal as devoid of any merits. It was held that
from the documents and circumstances it was established that the car was given
on a hire.
to the State Commission, the surveyor's report was not challenged by the
Against the order of the State Commission, a revision was
preferred before the National Commission and the same was dismissed vide order
dated 13.10.2008. According to the National Commission there was concurrent
finding on the fact that at the time of the accident the car was used for hire
and it was not given as a 4 gesture of goodwill. As such repudiation by the
insurance company was upheld.
This Court cannot, however, uphold the aforesaid stand taken by
the insurance company, which has been affirmed by all the fora below.
It is not in dispute that the appellant has taken a comprehensive
insurance policy nor is it in dispute that the accident took place during the
subsistence of the policy. The policy was, therefore, valid on the date of the
What is disputed by the insurance company is that the vehicle was
not used for personal use but was used by way of being hired, though no payment
for hiring charges was proved. However, according to the insurance company, by
using the vehicle on hire, the appellant had violated the terms of the insurance
policy and on that basis the insurance company was within its right to
repudiate the claim.
Reference in this case may be made to the decision of National
Commission rendered in the case of United India Insurance Company Limited v.
Gian Singh reported in 2006 CTJ 221 (CP) (NCDRC). In that decision of the
National Consumer Disputes Redressal Commission (NCDRC) it has been held that
in a case of violation of condition of the policy as to the nature of use of
the vehicle, the claim ought to be settled on a non-standard basis. The said
decision of the National Commission has been referred to by this Court in the
case of National Insurance Company Limited v. Nitin Khandelwal reported in 2008
(7) SCALE 351. In paragraph 13 of the judgment, in the case of Nitin Khandelwal
(supra) this Court held:- "..The appellant Insurance Company is liable to
indemnify the owner of the vehicle when the insurer has obtained comprehensive
policy for the loss caused to the insurer. The respondent submitted that even assuming
that there was a breach of condition of the insurance policy, the appellant
Insurance Company ought to have settled the claim on non- standard basis."
In the case of Nitin Khandelwal (supra) the State Commission
allowed 75% of the claim of the claimant on non-standard basis. The said order
was upheld by the National Commission and this Court refused to interfere with
the decision of the National Commission.
In this connection reference may be made to a decision of National
Commission in the case of New India Assurance Company Limited v. 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. Description Percentage of No. settlement 7
(i) Under declaration Deduct 3 years' of licensed differene in carrying
capacity premium from the amount of claim or deduct 25% of claim amount,
whichever is higher.
Overloading of Pay claims not vehicles beyond exceeding 75% of licensed
carrying admissible claim.
(iii) Any other breach Pay upto 75% of of warranty/ admissible claim.
of policy including limitation as to use
From a perusal of the aforesaid guidelines it is clear that one of
the cases where 75% claim of the admissible claim was settled was where
condition of policy including limitation as to use was breached.
In the instant case the entire stand of the insurance company is
that claimant has used the vehicle for hire and in the course of that there has
been an accident. Following the aforesaid guidelines, this Court is of the
opinion that 8 the insurance company cannot repudiate the claim in toto.
For the reasons stated, we cannot affirm the order of the fora
below. We direct the respondent insurance company to pay a consolidated sum of
Rs.2,50,000/- even though compensation claimed is Rs.5,00,000/-.
In the facts and circumstances of this case, the said sum is to be
paid to the appellant by the insurance company without any interest within a
period of six weeks from date. However, if the insurance company delays the
aforesaid payment beyond six weeks, then this amount will carry an interest of
9% from the date of the expiry of the period of six weeks till the date of
The appeal is thus allowed to the extent indicated above.