The New India Assurance Co Ltd Vs. M/S Tata Aig General Insurance Co Ltd - Court Judgment

1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE18H DAY OF JANUARY2016® BEFORE: THE HON’BLE MR. JUSTICE ANAND BYRAREDDY WRIT PETITION No.984 OF2010(GM-AC) BETWEEN: The New India Assurance Company Limited, No.33A, II Floor, I Stage, P.B.No.3883, Indiranagar, Bangalore 560 038, Represented by Division Office-5, Infantry Road, Bangalore 560 001, By its Senior Divisional Manager, Smt. Neeraja Kapur. …PETITIONER (By Shri C.R.Ravishankar, Advocate) AND:

1. M/s. Tata AIG General Insurance Company Limited, 5th Floor, West Entrance, Khanija Bhavan, Race Course Road, Bangalore 560 001, Represented by its Manager. 2 (Exports), Regd. Office: No.B1, 62/5, Begur Road, Bommanahalli, Bangalore 560 068, Represented by P.A.Holder, M/s. Tata AIG General Insurance Company Limited.

2. M/s. K. Mohan and Company 3. Sri. Chandrashekar Reddy, M/s. A.K.Transport, No.827/6, Ramamurthynagar Main Road, Banaswadi Post, Bangalore 560 043. … RESPONDENTS (By Shri O. Mahesh, Advocate for Respondent No.1; Respondent nos. 2 and 3 served) ***** This Writ Petition is filed under Articles 226 and 227 of the Constitution of India, praying to call for the records in MVC No.1628/2003 on the file of the Motor Accident Claims Tribunal Court of Small Causes Bangalore City (SCCH-10) peruse the same and set aside/quash the impugned order dated 12.5.2006 vide Annexure-A and consequently pass an order allowing the application and dismiss the claim petition as not maintainable in law. This Writ Petition having been heard and reserved on 08.12.2015 and coming on for pronouncement of Orders this day, the Court delivered the following:- 3 ORDER

This petition is filed challenging an Order passed by the Motor Accident Claims Tribunal & Court of Small Causes, Bangalore City (SCCH-10), on a preliminary issue, in a claim for compensation made under Section 166 of the Motor Vehicles Act, 1988.

2. The brief facts are as follows: The second respondent herein is an exporter. It had despatched a consignment of goods from Gujarat to Bangalore on a lorry bearing No.KA016075. The goods were duly insured, with the first respondent. It transpires that when the lorry was moving on National Highway no.4 and when it had reached Anegodu, Davanagere District, Karnataka, it is said to have collided with another lorry, bearing No.NL05A1062 As a result of the collision, the goods that were being carried are said to have been damaged beyond salvation. The second respondent is said to have laid a claim for the insurance amount with the first 4 respondent and recovered the same. The accident is said to have been attributed to the lorry bearing No.NL05A1062 The third respondent was said to be the owner of that lorry. The petitioner herein was the insurer of the same. Respondent no.1 after having satisfied the insurance claim of respondent no.2, pertaining to the goods that were damaged, has sought to recover the said amount from the owner and insurer of the offending lorry in the pending claim before the MACT. The petitioner herein and the third respondent had resisted the claim by filing their respective pleadings. The very maintainability of the claim petition was questioned and it was denied that the first respondent could make a claim under a purported right of subrogation. It is in that context that the Tribunal had proceeded to frame a preliminary issue and after hearing the parties has held that the claim was maintainable. It is that which is sought to be questioned in this petition. 5 3. The learned counsel for the petitioner contends that the Tribunal has erroneously placed reliance on an unreported judgment of this court in the case of K.F.Browne v. KSRTC, Bangalore, MFA18461992, which related to taking over the interest of the insured to all rights and remedies of the insured applicable to all cases of general insurance recognized under Section 141 of the Indian Contract Act, 1872. It is contended that the said decision would not enable the first respondent to initiate recovery proceedings in respect of damages to goods in transit under the provisions of the Motor Vehicles Act, 1988 (Hereinafter referred to as ‘the MV Act’, for brevity). On the other hand, reliance is placed by the learned counsel on the decision of a learned single judge of this court in Harkhu Bai v. Jiyaram, 2005 ACJ Kar. 1332 and the decision in Oriental Fire & General Insurance Co. Ltd. Vs. S. Rasheed Ahammed, ILR2006Kar. 1878, of yet another single Judge of this court, to contend that, if once the claim of the insured is settled, compensation could not be claimed by the insurer as a power of 6 attorney holder of the insured. And that compensation could not be claimed in respect of property or goods damaged in a motor accident, under the MV Act and that the remedy available to the claimant was only under the Common Carriers Act, 1865. It is further contended that under Section 147 of the MV Act, a claim in respect of goods in transit is impermissible.

4. On the other hand the learned counsel for the claimant respondents would assert that the claim is maintainable and that the decisions cited by the petitioner are out of context and that the same are not applicable to the facts of this case. It is emphasized that the liability of the petitioner is squarely covered under Section 147 of the MV Act. The insurer of the owner of the goods is in law entitled to recover the amount paid in settlement of the claim of the insured, from the insurer or the owner of the offending vehicle by virtue of the right of subrogation. 7 5. In the light of the above contentions the only question that arises for consideration is, whether the Tribunal was justified in concluding that the claim was maintainable.

6. The facts are not in dispute. Respondent no.2 had insured the goods carried by the lorry, with the first respondent. The said lorry having collided with another lorry, belonging to the third respondent, the goods belonging to the second respondent had been destroyed. The first respondent insurer having settled the claim of the second respondent owner of the goods, has preferred the claim, along with the owner of the goods, claiming a right of subrogation. 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"

8. The principle of subrogation is also statutorily recognized and described in Section 79 of the Marine Insurance Act, 1963 as follows : “79. Right of subrogation.—(1) Where the insurer pays for a total loss, either of the whole, or in the case of goods of any apportionable part, of the subject-matter insured, he thereupon becomes entitled to take over the interest of the assured in whatever may remain of the subject-matter so paid for, and he is thereby subrogated to all the rights and remedies of the assured in and in respect of that subject-matter as from the time of the casualty causing the loss. (2) Subject to the foregoing provisions, where the insurer pays for a partial loss, he acquires no title to the subject-matter insured, or such part of it as may remain, but he is thereupon subrogated to all rights and remedies of the assured in and in respect of the subject-matter insured as from the time of the casualty causing the loss, insofar as the assured has been indemnified, according to this Act, by such payment for the loss.” 9 Section 140 of the Contract Act, 1872, deals with the principle of subrogation with reference to the rights of a surety or guarantor, thus : “140. Rights of surety on payment or performance.—Where a guaranteed debt has become due, or default of the principal debtor to perform a guaranteed duty has taken place, the surety, upon payment or performance of all that is liable for, is invested with all the rights which the creditor had against the principal debtor.” The principles relating to subrogation have been summarized by a five judge bench of the Apex Court , in the case of Economic Transport Organization, Delhi vs. Charan Spinning Mills Private Limited and Another (2010) 4 SCC114 thus : “(1) 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 wrongdoer. (ii) Subrogation does not terminate nor puts an end to the right of the assured to sue the wrongdoer and recover the damages for the 10 loss. Subrogation only entitles the insurer to receive back the amount paid to the assured, in terms of the principles of subrogation. subrogation, (iii) Where the assured executes a letter of terms of subrogation, the rights of the insurer vis-à-vis the assured will be governed by the terms of the letter of subrogation. reducing the in the name of (iv) A subrogation enables the insurer to exercise the rights of the assured against third parties assured. Consequently, any plaint, complaint or petition for recovery of compensation can be filed in the name of the assured represented by the insurer as subrogee-cum- attorney, or by the assured and the insurer as co- plaintiffs or co-complainants. the assured, or by the (v) Where is left with no right or the assured executed a subrogation-cum-assignment in favour of the insurer (as contrasted from a subrogation), the assured interest. Consequently, the assured will no longer be entitled to sue the wrongdoer on its own account and for its own benefit. But as the instrument is a subrogation-cum-assignment, and not a mere assignment, the insurer has the choice of suing in its own name, or in the name of the assured, if the instrument so provides. The insurer becomes entitled to the entire amount recovered from the wrongdoer, that is, not only the amount that the insurer had paid to the assured, but also any amount received in excess of what was paid by it to the assured, if the instrument so provides.” 11 In the light of the above, it can be said that the insurer of the goods, belonging to the second respondent, has the legal right to recover the sum paid by it to the said respondent, from the petitioner.

7. In so far as the contention that the claim could not be made before the Tribunal and that such recovery could be claimed only by recourse to a civil suit, is concerned, the petitioner has placed reliance on the following authorities. We may briefly examine the same for their relevance to the facts of the present case. Oriental Insurance Company Limited v. K. Buden Sab and another, 2001 (1) Kar.LJ352 The appeal was by an Insurance company challenging an award by the Motor Accidents Claims Tribunal. The first respondent therein was the owner of goods being carried in a lorry belonging to the second respondent, a carrier entrusted with goods. The vehicle carrying the goods had capsized while on the road and the goods were totally lost. A claim for compensation was made against the insurer of the lorry. 12 The insurance company denied any liability under the policy of insurance, relying on a clause in the policy that was as follows : “The company shall not be liable in respect of damage to property belonging to or held in trust by or in the custody or control of the insured or a member of the insured's household or being conveyed by the motor vehicle."

This court had held that the above clause specifically excluded the liability in respect of damage caused to goods while being conveyed. It was also opined that the owner of the goods could not be considered a third party under the MV Act. In that, the goods were being carried under a contract, which cast a duty on the transporter to deliver the goods safely. Therefore, it was a case of a breach of the condition of a contract and that it was not a tort. The insurer was hence absolved of liability. It cannot be said that the above case would have any relevance to the present case on hand. Harkhu Bai and others v. Jiyaram and others, 2005 ACJ1332: These were two appeals decided by a Division bench of 13 this court. It is the appeal filed by the owner of a lorry, on the dismissal of his claim before the Motor Accident Claims Tribunal, claiming compensation in respect of damage to his vehicle in an accident, which may be relevant for our purpose. The other appeal seeking enhancement of compensation by the accident victims’ family, is not relevant. The Division bench rejected the appeal affirming the finding of the Tribunal that the appellant had insured the vehicle and had raised a claim against his insurer and had received payment in full and final settlement, without any reservation or demur. It was not shown that such payment received was part only of the total damage, hence it was held that the claim had been rightly rejected. This decision is also not relevant for the case on hand. Oriental Fire and General Insurance Co. Ltd. v. S. Rasheed Ahammed, ILR2006Kar 1878 : The appellant was the insurance company which was mulcted with the liability to pay 14 compensation on a claim by the owner of goods carried in a vehicle of which the appellant was the insurer. The vehicle was engaged by the owner of the goods and the vehicle having met with an accident, while in transit, the goods were said to have been damaged and lost. It was held that Section 166 does not permit a claim before the Tribunal, under the MV Act, in respect of property in transit. That the claimant could only seek a remedy with reference to the Common Carriers Act, 1865. And that Section 147 of the Act did not cast any liability on the insurer in respect of damage to goods in transit. The award made against the Insurer was set aside. The above decision is also not relevant for the reason that in so far as the case on hand is concerned, the claim was by the insurer, who had settled the claim, of the owner of the goods being carried in lorry -"A". The claim was made against the Insurer and the owner of the offending lorry -"B", involved in the accident. The owner of the goods was hence a third party whose property was damaged and lost. The owner of the goods was not 15 proceeding against the transporter engaged by him, to be able to invoke the provisions of the Common Carriers Act, 1865. In terms of Section 147 of the MV Act, a policy of insurance is statutorily required to insure the insured against any liability in respect of damage to any property of a third party, caused by the vehicle in respect of which the policy of insurance is issued. The Tribunal is hence right in its view that the claim petition was maintainable. The writ petition is accordingly dismissed. KS* Sd/- JUDGE