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REPORTABLE

IN THE SUPREME COURT OF INDIA  CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO(S).         21552                  OF 2017 (@SPECIAL LEAVE PETITION (C) NO. 34605 OF 2015)

MANJEET SINGH     …APPELLANT (S)

Versus

NATIONAL INSURANCE COMPANY  LTD. & ANR.  …RESPONDENT(S)

J U D G M E N T

Deepak Gupta, J.

Leave granted.

2. None has put in appearance on behalf of the respondent

no. 2 despite service. Hence, the matter has been heard in the

absence of the learned counsel for the respondent no. 2.

3.  Briefly stated the facts of the case are that the appellant

Manjeet  Singh  purchased  a  second-hand  Tata  open  truck

under a Hire Purchase agreement dated 13.10.2003 for a sum

of  Rs.  8,57,000/-  from  Respondent  No.2.  The  vehicle  was

hypothecated in favour of Respondent No.2.  It was insured for

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a value of Rs.7,28,000/- and the insurance policy was valid

from 25.09.2004 to 24.09.2005.  On 12.12.2004, the vehicle

was being driven by Sanjay Kumar on the National Highway

near Karnal.  Some persons gave a signal to the driver to stop

the vehicle.  After he stopped, they requested the driver to give

them lift up to Yamuna Nagar since no other mode of transport

was available.  Since it was a cold wintery night, the driver

gave a lift  to these persons.  After a little  while,  one of  the

passengers  requested  the  driver  to  stop  the  truck  on  the

pretext that he had to answer the call of nature.  When the

truck driver stopped the truck, the three passengers assaulted

the driver, tied his hands and legs with a rope and threw him

in a nearby field and fled away with the vehicle.   

4. An  FIR  was  lodged  at  Police  Station,  Ladwa  on

13.12.2004 and the respondent no. 2, finance company was

intimated about the theft.  The complainant had also given a

letter  of  authority  to  the  finance  company to  negotiate  and

settle  the  claim with the  insurance company.   However,  no

settlement was arrived at and the claim was not settled and

repudiated  vide  letter  dated  11.11.2005  on  the  ground  of

breach of terms of the policy.  The owner-complainant filed a

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claim petition before the District Consumer Disputes Redressal

Forum  (for  short  ‘the  District  Forum’)  alleging  that  the

insurance company was liable to compensate him for the loss

caused to him by the theft of the truck.   The main defence

taken by the respondent no. 2, insurance company was that

the driver of the vehicle, by giving a lift to the passengers, had

violated the terms of the policy and, as such, there was breach

of  policy  and  the  insurance  company  was  not  liable.   This

ground found favour with the District Forum.  The appeal filed

by the claimant before the State Consumer Disputes Redressal

Commission  (for  short  ‘the  State  Commission’)  was  rejected

and so was the revision filed before  the National  Consumer

Disputes  Redressal  Commission  (for  short  ‘the  National

Commission’).  The District Forum also rejected the claim on

the ground that the arbitration proceedings had been initiated

by  the  Respondent  No.  2,  finance  company  against  the

complainant and they were at the final stage.   

5. As  far  as  the  first  ground is  concerned,  we are  of  the

considered opinion, that the District Forum had not properly

appreciated the scope and ambit of the policy.  The violation of

the condition should be such a fundamental breach so that

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the claimant cannot claim any amount whatsoever. As far as

the  violation  in  carrying  passengers  is  concerned,  this  has

consistently been held not to be a fundamental breach and, in

this behalf, we may make reference to the judgments of this

Court in the case of  National Insurance Co. Ltd. v. Swaran

Singh, (2004)  3  SCC 297,  National  Insurance Co.  Ltd.  v.

Nitin Khandelwal,  (2008)  11 SCC 259,  Lakhmi Chand v.

Reliance  General  Insurance,  (2016)  3  SCC  100 and  B.V.

Nagaraju v. Oriental Insurance Co. Ltd., (1996) 4 SCC 647.   

6. In Lakhmi Chand case (supra),  this Court held that to

avoid  its  liability,  the  insurance  company  must  not  only

establish the defence that the policy has been breached, but

must also show that the breach of the policy is so fundamental

in nature that it brings the contract to an end.

7. In the present case, the appellant who is the owner, was

not  at  fault.   His  driver  gave  a  lift  to  some  passengers.

Carrying such passengers may be a breach of the policy, but it

cannot be said to be such a fundamental breach as to bring

the insurance policy to an end and to terminate the insurance

policy.   The driver, on a cold wintery night, gave lift to some

persons standing on the road.  It was a humanitarian gesture.

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It  cannot  be  said  to  be  such  a  breach  that  it  nullifies  the

policy.  No doubt, these passengers turned against the driver

and  stole  the  truck,  but  this,  the  driver  could  not  have

foreseen.  In the cases cited above, such claims where there is

breach of policy, have been treated to be non-standard claims

and have been directed to be settled at 75%.   

8. As  far  as  the  second  ground  is  concerned,  we  fail  to

understand  how  the  arbitration  proceedings  between  the

financer  and  the  insurer,  relating  to  recovery  of  the  loan

amount,  can  in  any  way,  negate  the  rights  of  the  insured

against the insurance company.    9. In view of the above discussion, we allow the appeal, set

aside the orders of the courts below and direct the respondent

no.1-insurance company to pay 75% of the insured amount of

Rs.7,28,000/- along with interest at the rate of 9% per annum

from the date of filing the claim petition till the deposit of the

amount.  In addition, the insurance company shall also pay

another  sum of  Rs.1,00,000/-  as  compensation.   Since  the

financer is also a party to the petition, the amount shall be

deposited before the District Forum, and in case the claim of

the financer has not been settled in terms of the arbitration

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award, then the deposited amount shall first be used to pay

the awarded amount and the balance, if any, shall be paid to

the  appellant.   The  appeal  is  disposed  of  in  the  aforesaid

terms.  Pending application(s), if any, also stand(s) disposed of.

….……………………..J. (MADAN B. LOKUR)

.….…………………….J. (DEEPAK GUPTA)

New Delhi December 08, 2017