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NON-REPORTABLE  

 IN THE SUPREME COURT OF INDIA  CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS.49-50 OF 2016 (Arising Out of SLP (C) Nos.37534-37535 of 2013)

 LAKHMI CHAND             …………APPELLANT

Vs.

RELIANCE GENERAL INSURANCE           …………RESPONDENT

   J U D G M E N T

V. GOPALA GOWDA, J.

Leave granted.

2.The present appeals arise out of the impugned judgment  

and order dated 26.04.2013 in Revision Petition No.

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2032  of  2012  and  order  dated  23.07.2013  in  Review  

Petition  No.  253  of  2013  passed  by  the  National  

Consumer  Disputes  Redressal  Commission,  New  Delhi  

(hereinafter  referred  to  as  the  “National  

Commission”),  whereby  the  petitions  challenging  the  

order dated  29.02.2012 passed  by the  Haryana State  

Consumer Disputes Redressal Commission were dismissed.

3. The brief facts of the case which are required to  

appreciate the rival legal contentions advanced by the  

learned counsel appearing on behalf of the parties are  

stated in brief as hereunder:-

4.The appellant was the owner of a Tata Motors goods  

carrying vehicle bearing registration No.HR-67-7492.  

The vehicle was insured with the respondent-Company  

vide  policy  No.  15019923334104992  with  effect  from  

31.07.2009, valid upto 30.07.2010. The risk covered in  

this policy was to the tune of Rs.2,21,153/-. The said  

vehicle met with an accident on 11.02.2010 on account  

of rash and negligent driving of the offending vehicle

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bearing registration no. UP-75-J 9860. In this regard,  

an FIR No.66 of 2010 dated 11.02.2010 was registered  

with  the  jurisdictional  Police  Station,  Sadar,  

Fatehabad, for the offence punishable under Sections  

279,  337,  304A  and  427  of  the  Indian  Penal  Code  

(hereinafter referred to as “the IPC”).

5.The  appellant  incurred  expenses  amounting  to  

Rs.1,64,033/- for the repair of his vehicle and also  

informed the respondent- Company about the accident  

and damage caused to his vehicle. In this connection,  

the respondent-Company appointed one Mr. Atam Prakash  

Chawla, as the Surveyor to assess the damage caused to  

the said vehicle. After inspecting the vehicle, the  

Surveyor assessed the damage caused to the vehicle at  

Rs.90,000/-,  whereas  the  appellant  had  preferred  a  

claim  for  a  sum  of  Rs.1,64,033/-  with  supporting  

bills. In addition to above, the respondent-Company  

appointed M/s Innovation Auto Risk Claim Manager for  

the purpose of investigation. According to the report

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of the investigator, five passengers were travelling  

in  the  goods-carrying  vehicle,  though  the  seating  

capacity  of  the  vehicle  as  per  the  registration  

certificate was only 1+1. On the basis of findings of  

the said report, the respondent-Company vide letter  

dated 26.07.2010 rejected the claim of the appellant  

for the reason that the loss did not fall within the  

scope and purview of the insurance policy.

6.Aggrieved of the letter of rejection of the claim of  

the  appellant  by  the  respondent-Company,  he  filed  

Complaint  No.517  of  2010  against  the  respondent-

Company dated 17.09.2010 before the District Consumer  

Disputes  Redressal  Forum,  Sonepat  (hereinafter  

referred to as the “District Forum”) under Section 12  

of the Consumer Protection Act, 1986 for the claim of  

Rs.1,64,033/- towards the repair of his vehicle on the  

ground  that  the  rejection  of  the  claim  amounts  to  

deficiency in service on the part of the respondent-

Company.

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7. The  respondent-Company  filed  a  detailed  written  

statement  before  the  District  Forum  disputing  the  

claim of the appellant. It took the plea that the  

complainant had violated the terms and conditions of  

the policy, as five passengers were travelling in the  

goods-carrying  vehicle  at  the  time  of  accident,  

whereas the permitted seating capacity of the motor  

vehicle of the appellant was only 1+1.

8. The District Forum on the basis of the pleadings of  

the parties and the materials on record considered the  

judgment of the National Commission in the case of  

National  Insurance  Co.  Ltd.  v. Pravinbhai  D.  

Prajapati1, wherein it was held that if the number of  

persons travelling in the vehicle at the time of the  

accident  did  not  have  a  bearing  on  the  cause  of  

accident, then the mere factum of the presence of more  

persons  in  the  vehicle  would  not  disentitle  the  

insured claimant from claiming compensation under the  

1 IV 2010 CPJ 315 (NC)

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policy towards the repair charges of the vehicle paid  

by  the  appellant.  The  District  Forum  accordingly  

directed the respondent-Company to settle the claim of  

the appellant on non-standard basis upto 75% of the  

amount  spent  for  effecting  repairs  to  the  damaged  

vehicle  after  taking  into  consideration  the  claim  

amount of Rs.1,64,033/-. The District Forum further  

directed the respondent-Company to settle the amount  

to be paid to the appellant along with interest at the  

rate of 9% per annum from the date of lodging of the  

claim by the appellant with the respondent-Company.  

The  respondent-Company  was  further  directed  to  pay  

Rs.2,000/-  for  rendering  deficient  service,  causing  

mental  agony  and  harassment  and  towards  litigation  

expenses incurred by the appellant.

9. Aggrieved  of  the  order  of  the  District  Forum,  the  

respondent  Company  preferred  an  appeal  before  the  

State  Commission  urging  various  grounds.  The  State  

Commission placed reliance upon the judgment of this

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Court in the case of Suraj Mal Ram Niwas Oil Mills (P)  

Ltd.  v. United  India  Insurance  Co.  Ltd.  &  Anr.2,  

wherein it was held as under:

“Before  embarking  on  an  examination  of  the  correctness of the grounds of repudiation of  the policy, it would be apposite to examine  the nature of a contract of insurance. It is  trite that in a contract of insurance, the  rights  and  obligations  are  governed  by  the  terms  of  the  said  contract.  Therefore,  the  terms of a contract of insurance law have to  be strictly construed and no exception can be  made on the ground of equity.   Thus,  it  needs  little  emphasis  that  in  construing  the  terms  of  a  contract  of  insurance important, and it is not open for  the court to add, delete or substitute any  words.  It  is  also  well  settled  that  since  upon  issuance  of  an  insurance  policy,  the  insurer  undertakes  to  indemnify  the  loss  suffered by the insured on account of risk  covered by the policy, its terms have to be  strictly construed to determine the extent of  liability  of  the  insurer.  Therefore,  the  endeavour of the court should always be to  interpret the words in which the contract is  expressed by the parties.”

2 (2010) 10 SCC 567

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10. The State Commission applied the observation made  

in the above said case by this Court to the case on  

hand and held that the District Forum has committed a  

serious error in allowing the complaint filed by the  

appellant herein against the respondent-Company. The  

State  Commission  accepted  the  appeal  filed  by  the  

respondent-Company and dismissed the complaint of the  

appellant, vide its order dated 29.02.2012 by setting  

aside the judgment and order of the District Forum.

11. The said judgment passed by the State Commission  

was challenged by the appellant before the National  

Commission by way of filing Revision Petition No.2032  

of 2012 under Section 21(b) of the Consumer Protection  

Act, 1986 questioning the correctness of the same by  

urging various tenable grounds.

12. After examining the material evidence on record,  

the National Commission has arrived at the conclusion  

and held that the factum of the vehicle in question

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carrying six passengers at the time of the occurrence  

of the accident was an undisputed fact. Thus, there  

had been a violation of the terms and conditions of  

the insurance policy covered to the vehicle by the  

appellant, as he had allowed six passengers to travel  

in the vehicle when the permitted load was only 1+1.  

The National Commission upheld the order passed by the  

State Commission and dismissed the Revision Petition  

filed by the appellant by recording its reasons. The  

Review Petition  filed against  the dismissal  of the  

Revision  Petition  by  the  appellant  was  

also dismissed without considering the grounds urged  

for reviewing its order.

13. The present appeals have been filed challenging  

the  orders  passed  by  the  National  Commission  in  

dismissing the Revision and Review petitions. In our  

considered view, the concurrent findings recorded by  

the National Commission in the impugned judgment and  

order are erroneous in law for the following reasons.

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 14. It is an admitted fact that the accident of the  

vehicle of the appellant was caused on account of rash  

and negligent driving of the offending vehicle bearing  

registration no. UP-75-J9860. An FIR No. 66 of 2010  

dated 11.02.2010 was registered under Sections 279,  

337,  338,  304-A  and  427  of  the  Indian  Penal  Code  

against  the  driver  of  the  said  vehicle  for  the  

offences  referred  to  supra.  The  vehicle  of  the  

appellant was badly damaged in the accident and it is  

an  undisputed  fact  that  the  report  of  Surveyor  

assessed  the  loss  at  Rs.90,000/-,  but  the  actual  

amount incurred by the appellant on the repair of his  

vehicle  was  Rs.1,64,033/-.  The  said  claim  was  

arbitrarily rejected by the respondent-Company on the  

ground that the damage caused to the vehicle did not  

fall within the scope and purview of the insurance  

policy,  as  there  was  a  contravention  of  terms  and  

conditions of the policy of the vehicle.

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15.The National Commission upheld the order of dismissal  

of the complaint of the appellant passed by the State  

Commission. The National Commission however, did not  

consider the judgment of this Court in the case of  

B.V. Nagaraju v. Oriental Insurance Co. Ltd Divisional  

Officer, Hassan3. In that case, the insurance company  

had taken the defence that the vehicle in question was  

carrying more passengers than the permitted capacity  

in terms of the policy at the time of the accident.  

The said plea of the insurance company was rejected.  

This Court held that the mere factum of carrying more  

passengers than the permitted seating capacity in the  

goods carrying vehicle by the insured  does not amount  

to a fundamental breach of the terms and conditions of  

the policy so as to allow the insurer to eschew its  

liability towards the damage caused to the vehicle.  

This Court in the said case has held as under:-  

“It is plain from the terms of the Insurance  Policy that the insured vehicle was entitled to  carry  six  workmen,  excluding  the  driver.  If  those  six  workmen  when  travelling  in  the  vehicle, are assumed not to have increased risk  

3 (1996) 4 SCC 647

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from the point of view of the Insurance Company  on occurring of an accident, how could those  added persons be said to have contributed to  the causing of it is the pose, keeping apart  the load it was carrying. In the present case  the driver of the vehicle was not responsible  for the accident. Merely by lifting a person or  two,  or  even  three,  by  the  driver  or  the  cleaner of the vehicle, without the knowledge  of  the  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.”

                        (emphasis laid by this Court) 16. Further,  in  the  case  of  National  Insurance  

Company Ltd.  v. Swaran Singh & Ors4.  a three judge  

bench of this Court has held as under:-

”49. Such a breach on the part of the insured  must be established by the insurer to show that  not only the insured used or caused or permitted  to be used the vehicle in breach of the Act but  also that the damage he suffered flowed from the  breach.

52. In Narvinva’s case (supra) a Division Bench  of this Court observed: “The insurance company  complains of breach of a term of contract which  

4 (2004) 3 SCC 297

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would permit it to disown its liability under  the contract of insurance. If a breach of a term  of  contract  permits  a  party  to  the  contract  complaints of breach to prove that the breach  has been committed by the other party to the  contract. The test in such a situation would be  who would fail if no evidence is led.  

69. The proposition of law is no longer res-  integra that the person who alleges breach must  prove the same. The insurance company is, thus,  required to establish the said breach by cogent  evident. In  the  event  the  insurance  company  fails to prove that there has been breach of  conditions of policy on the part of the insured,  the insurance company cannot be absolved of its  liability.”  

(emphasis laid by this Court)

17. The judgment in the case of Swaran Singh (supra)  

has been followed subsequently in the case of Oriental  

Insurance Company Ltd. v. Meena Variyal5, wherein this  

Court held as under:-  

“We shall now examine the decision in Swaran  Singh on which practically the whole of the  arguments  on  behalf  of  the  claimants  were  rested. On examining the facts, it is found  that,  that  was  a  case  which  related  to  a  claim by a third party. In claims by a third  

5 (2007) 5 SCC 428

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party, there cannot be much doubt that once  the  liability  of  the  owner  is  found,  the  insurance company is liable to indemnify the  owner, subject of course, to any defence that  may be available to it under Section 149(2)  of the Act. In case where the liability is  satisfied  by  the  insurance  company  in  the  first instance, it may have recourse to the  owner in respect of a claim available in that  behalf, it may have recourse to the owner in  respect  of  a  claim  available  that  behalf.  Swaran Singh was a case where the insurance  company raised a defence that the owner had  permitted  the  vehicle  to  be  driven  by  a  driver  who  really  had  no  licence  and  the  driving licence produced by him was a fake  one. There Lordships discussed the position  and  held  ultimately  that  a  defence  under  Section  149(2)(a)(ii)  of  the  Act  was  available to an insurer when a claim is filed  either under Section 163-A or under Section  166  of  the  Act.  The  breach  of  a  policy  condition  has  to  be  proved  to  have  been  committed  by  the  insured  for  avoiding  liability by the insurer. Mere absence of or  production of fake or invalid driving licence  or disqualification of the driver for driving  at the relevant time, are not in themselves  defences  available  to  the  insurer  against  either the insured or the third party.  The  insurance  company  to  avoid  liability,  must  not  only  establish  the  available  defence  raised in the proceeding concerned but must  also  establish  breach  on  the  part  of  the  owner of the vehicle for which the burden of  proof would rest with the insurance company.  Whether  such  a  burden  had  been  discharged,  would  depend  upon  the  facts  breach  on  the  part  of  the  insured  concerning  a  policy  condition, the insurer would not be allowed  to  avoid  its  liability  towards  the  insured

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unless  the  said  breach  of  condition  is  so  fundamental  as  to  be  found  to  have  contributed to the cause of the accident.”                 (emphasis laid by this Court)

18. It becomes very clear from a perusal of the above  

mentioned case law of this Court that the insurance  

company, in order to avoid liability must not only  

establish  the  defence  claimed  in  the  proceeding  

concerned, but also establish breach on the part of  

the owner/insured of the vehicle for which the burden  

of proof would rest with the insurance company. In the  

instant case, the respondent-Company has not produced  

any  evidence  on  record  to  prove  that  the  accident  

occurred on account of the overloading of passengers  

in the goods carrying vehicle. Further, as has been  

held in the case of B.V. Nagaraju (supra) that for the  

insurer  to  avoid  his  liability,  the  breach  of  the  

policy must be so fundamental in nature that it brings  

the contract to an end. In the instant case, it is  

undisputed  that  the  accident  was  infact  caused  on  

account  of  the  rash  and  negligent  driving  of  the  

offending  vehicle  by  its  driver,  against  whom  a

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criminal case vide FIR no. 66 of 2010 was registered  

for  the  offences  referred  to  supra  under  the  

provisions of the IPC. These facts have not been taken  

into consideration by either the State Commission or  

National  Commission  while  exercising  their  

jurisdiction  and  setting  aside  the  order  of  the  

District Forum. Therefore, the judgment and order of  

the National Commission dated 26.04.2013 passed in the  

Revision Petition No. 2032 of 2012 is liable to be set  

aside, as the said findings recorded in the judgment  

are erroneous in law.  

19. Accordingly, we allow these appeals and restore  

the judgment and order of District Forum. Further, we  

award a sum of Rs.25,000/- towards the cost of the  

litigation as the respondent-Company has unnecessarily  

litigated  the  matter  up  to  this  Court  despite  the  

clear pronouncement of law laid down by this Court on  

the question with regard to the violation of terms and  

conditions of the policy and burden of proof is on the

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insurer to prove the fact of such alleged breach of  

terms and conditions by the insured.  

 20. Since we have restored the judgment and order of  

District Forum, we direct the respondent-Company to  

pay  the  amount  awarded  by  the  District  Forum  with  

interest and the cost which we have awarded in these  

proceedings  within  six  weeks  from  the  date  of  the  

receipt of the copy of this judgment.   

…………………………………………CJI.  [T.S. THAKUR]

                       ………………………………………………J.  

 [V. GOPALA GOWDA] New Delhi, January 7, 2016

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ITEM NO.1B-For Judgment     COURT NO.10          SECTION XVII                S U P R E M E  C O U R T  O F  I N D I A                        RECORD OF PROCEEDINGS Civil Appeal  No(s).49-50/2016 arising from SLP(C) Nos.  37534- 37535/2013 LAKHMI CHAND                                       Appellant(s)                                 VERSUS RELIANCE GENERAL INSURANCE                       Respondent(s) Date : 07/01/2016 These appeals were called for pronouncement  of JUDGMENT today. For Appellant(s)                      Mr. Munawwar Naseem,Adv.                       For Respondent(s)                      Mr. Garvesh Kabra,Adv.                       

Hon'ble  Mr.  Justice  V.Gopala  Gowda  pronounced the judgment of the Bench comprising  Hon'ble the Chief Justice and His Lordship.

Leave granted. The  appeals  are  allowed  in  terms  of  the  

signed Non-Reportable Judgment.  

       (VINOD KUMAR)        (MALA KUMARI SHARMA)    COURT MASTER       COURT MASTER    (Signed Non-Reportable judgment is placed on the file)