Reportable  

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.5611 OF 1999

Economic Transport Organization       …  Appellant

Vs.

M/s. Charan Spinning Mills (P) Ltd. & Anr.      …  Respondents

J U D G M E N T

R.V.RAVEENDRAN, J.

This appeal was referred by a two-Judge Bench to a  

larger  bench  on  30.11.2000,  being  of  the  view  that  the  

decision of this Court in Oberai Forwarding Agency v. New  

India  Assurance  Co.  Ltd.  –  2002  (2)  SCC  407,  required  

reconsideration.  In  turn,  the  three-Judge  Bench  has  

referred the matter to a Constitution Bench on 29.3.2005.

Factual Background :

2. The  first  respondent  (also  referred  to  as  the  

‘Assured’  or  the  ‘consignor’)  is  a  manufacturer  of  the  

cotton yarn. It took a policy of insurance from the second

respondent (National Insurance Co. Ltd, referred to as the  

‘Insurer’),  covering  transit  risks  between  the  period  

11.5.1995 and 10.5.1996 in respect of cotton yarn sent by  

it  to  various  consignees  through  rail  or  road  against  

theft,  pilferage,  non-delivery  and/or  damage.  The  first  

respondent entrusted a consignment of hosiery cotton yarn  

of  the  value  of  Rs.7,70,948/-  to  the  appellant  (also  

referred  to  as  the  ‘carrier’)  on  6.10.1995  for  

transportation and delivery to a consignee at Calcutta. The  

goods  vehicle  carrying  the  said  consignment  met  with  an  

accident and the consignment was completely damaged. On the  

basis of a surveyor’s certificate issued after assessment  

of the damage, the second respondent settled the claim of  

the  first  respondent  for  Rs.447,436/-  on  9.2.1996.  On  

receiving  the  payment,  the  first  respondent  executed  a  

Letter  of  Subrogation-cum-Special  Power  of  Attorney  in  

favour of the second respondent on 15.2.1996. Thereafter,  

respondents 1 and 2 filed a complaint under the Consumer  

Protection  Act,  1986  (‘Act’  for  short)  against  the  

appellant before the District Consumer Disputes Redressal  

Commission, Dindigul, claiming compensation of Rs.447,436/-  

with interest at 12% per annum, for deficiency in service,  

as the damage to the consignment was due to the negligence  

on  the  part  of  the  appellant  and  its  servants.  It  was  

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averred that the insurer as subrogee was the co-complainant  

in  view  of  the  statutory  subrogation  in  its  favour  on  

settlement of the claim and the letter of subrogation-cum-

special power of attorney executed by the Assured.    

3. The  District  Forum  by  its  order  dated  8.11.1996  

allowed  the  complaint  and  directed  the  appellant  to  pay  

Rs.447,436/- with interest at the rate of 12% per annum  

from the date of accident (8.10.1995) till date of payment  

to  the  Insurer,  on  the  basis  of  the  subrogation.  The  

District  Forum  held  that  the  failure  to  deliver  the  

consignment in sound condition was a deficiency in service,  

in view of the unrebutted presumption of negligence arising  

under  sections  8  and  9  of  the  Carriers  Act,  1865.  The  

appeal  filed  by  the  appellant  before  the  State  Consumer  

Disputes Redressal Commission, Madras, challenging the said  

order was dismissed on 2.4.1998. The appellant thereafter  

filed  a  revision  before  the  National  Consumer  Disputes  

Redressal  Commission  in  the  year  1999.   The  National  

Commission dismissed the appellant’s revision petition by a  

short non-speaking order dated 19.7.1999 which reads thus:  

“We do not find any illegality or jurisdictional error in  

the order passed by the State Commission.” The said order  

is challenged in this appeal by special leave.  

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The Issue  

4. The  appellant  herein  resisted  the  complaint  on  the  

following grounds:  

(i) The Assured (consignor) had insured the goods against  

transit  risk  with  the  Insurer.  The  Insurer  had  already  

settled the claim of the Assured. As a consequence, the  

Assured  had  no  surviving  claim  that  could  be  enforced  

against  the  carrier.  At  all  events,  as  the  Assured  had  

transferred all its interest in the claim to the Insurer,  

it had no subsisting interest or enforceable right.  

(ii) The Insurer did not entrust the consignment to  

the carrier for transportation. The appellant did not agree  

to provide any service to the Insurer. There was no privity  

of contract between the Insurer and the appellant. As a  

result, the Insurer was not a ‘consumer’ as defined in the  

Act and a complaint under the Act was not maintainable.

(iii) The  letter  of  subrogation  was  executed  by  the  

Assured  (consignor),  after  the  goods  were  damaged.  This  

amounted  to  a  transfer  of  a  mere  right  to  sue  by  the  

Assured in favour of the Insurer, which was invalid and  

enforceable.  

(iv) There was no negligence on the part of its driver  

and the accident occurred due to circumstances beyond his  

control.  The  respondents  did  not  place  any  evidence  to  

prove  any  negligence,  in  spite  of  appellant’s  denial  of  

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negligence. Having regard to section 14(1)(d) of the Act,  

liability  can  be  fastened  on  a  carrier,  for  payment  of  

compensation, only by establishing that the consumer had  

suffered  loss  or  injury  due  to  the  negligence  of  the  

carrier  as  a  service  provider.  In  view  of  the  special  

provision in section 14(1)(d) of the Act, the complainants  

under the Act were not entitled to rely upon the statutory  

presumption of negligence available under section 9 of the  

Carriers  Act,  1865  which  is  available  in  civil  suits  

brought  against  carriers.  In  the  absence  of  proof  of  

negligence,  it  was  not  liable  to  pay  compensation  for  

damage to the goods.  

5. After leave was granted in this case on 27.9.1999, a  

three-Judge Bench of this Court rendered its decision in  

Oberai Forwarding Agency on 1.2.2000, making a distinction  

between  ‘assignment’  and  ‘subrogation’.  This  Court  held  

that where there is a subrogation simpliciter in favour of  

the  insurer  on  account  of  payment  of  the  loss  and  

settlement of the claim of the assured, the insurer could  

maintain an action in the Consumer Forum in the name of the  

assured,  who  as  consignor  was  a  consumer.  This  Court  

further held that when there is an assignment of the rights  

of the assured in favour of the insurer, the insurer as  

assignee cannot file a complaint under the Act, as it was  

not a ‘consumer’ under the Act. This Court held that even  

if the assured was a co-complainant, it would not enable  

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the insurer to maintain a complaint under the Act, if it  

was an assignee of the claim. We extract below the relevant  

portion of the said judgment:  

“17. In  its  literal  sense,  subrogation  is  the substitution of one person for another. The  doctrine of subrogation confers upon the insurer  the right to receive the benefit of such rights  and  remedies  as  the  assured  has  against  third  parties in regard to the loss to the extent that  the insurer has indemnified the loss and made it  good.  The  insurer  is,  therefore,  entitled  to  exercise whatever rights the assured possesses to  recover to that extent compensation for the loss,  but it must do so in the name of the assured.

x x x x x

19. With  the  distinction  between  subrogation  and  assignment  in  view,  let  us  examine the letter of subrogation executed by the  second  respondent  in  favour  of  the  first  respondent. Its operative portion may be broken  up  into  two,  namely,  (i)  “we  hereby  assign,  transfer  and  abandon  to  you  all  our  rights  against  the  Railway  Administration,  road  transport  carriers  or  other  persons  whatsoever,  caused or arising by reason of the said damage or  loss and grant you full power to take and use all  lawful  ways  and  means  in  your  own  name  and  otherwise at your risk and expense to recover the  claim for the said damage or loss”; and (ii) ‘we  hereby  subrogate  to  you  the  same  rights  as  we  have on consequence of or arising from the said  loss or damage”.  

20. By  the  first  clause  the  second  respondent assigned and transferred to the first  respondent all its rights arising by reason of  the loss of the consignment. It granted the first  respondent  full  power  to  take  lawful  means  to  recover the claim for the loss, and to do so in  its  own  name.  If  it  were  a  mere  subrogation,  

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first,  the  word  “assigned”  would  not  be  used.  Secondly, there would not be a transfer of all  the second respondent’s rights in respect of the  loss  but  the  transfer  would  be  limited  to  the  recovery  of  the  amount  paid  by  the  first  respondent to the second respondent. Thirdly, the  first respondent would not be entitled to take  steps to recover the loss in its own name; the  steps for recovery would have to be taken in the  name of the second respondent. Thus, by the first  clause there was an assignment in favour of the  first respondent.

21. The  second  clause,  undoubtedly,  used  the word “subrogate”, but it conferred upon the  first  respondent  “the  same  rights”  that  the  second  respondent  had  “in  consequence  of  or  arising  from  the  said  loss  or  damage”,  which  meant that the transfer was not limited to the  quantum  paid  by  the  first  respondent  to  the  second  respondent  but  encompassed  all  the  compensation  for  the  loss.  Even  by  the  second  clause,  therefore,  there  was  an  assignment  in  favour of the first respondent.

22. Learned  counsel  for  the  first  respondent  submitted  that  the  letter  of  subrogation  and  the  special  power  of  attorney  should be read together and, so read, it would be  seen  that  the  first  respondent  was  not  an  assignee  of  the  second  respondent’s  rights  but  was merely subrogated to them. The terms of the  letter of subrogation are clear. They cannot be  read differently in the light of another, though  contemporaneous, document.

23. Now,  as  is  clear,  the  loss  of  the  consignment  had  already  occurred.  All  that  was  assigned and transferred by the second respondent  to the first respondent was the right to recover  compensation for the loss. There was no question  of the first respondent being a beneficiary of  the service that the second respondent had hired  from  the  appellant.  That  service,  namely,  the  transportation  of  the  consignment,  had  already  been availed of by the second respondent, and in  the course of it the consignment had been lost.  

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The  first  respondent,  therefore,  was  not  a  “consumer”  within  the  meaning  of  the  Consumer  Protection Act and was, therefore, not entitled  to maintain the complaint.  

24. By  reason  of  the  transfer  and  assignment  of  all  the  rights  of  the  second  respondent in the first respondent’s favour, the  second  respondent  retained  no  right  to  recover  compensation for the loss of the consignment. The  addition  of  the  second  respondent  to  the  complaint as a co-complainant did not, therefore,  make the complaint maintainable.”

6. The referring Bench which heard this appeal considered  

the  decision  in  Oberai.  It  was  of  the  view  that  Oberai  

required  reconsideration  by  a  larger  Bench,  for  the  

following reasons (vide order dated 30.11.2000) :

“In the case of simple subrogation in favour of  an insurance company, there is no difficulty in  accepting  that  the  insurance  company  gets  subrogated to the rights of the consumer wherein  the  insurance  company  has  paid  compensation  to  the  consumer  pursuant  to  the  contract  entered  into  between  the  consumer  and  the  insurance  company. As per the principle referred to in the  judgment  in  Oberai  Forwarding  Agency’s  case  (supra),  if  there  was  simple  subrogation,  then  the insurance company could maintain an action in  the consumer court but it had to do so in the  name of the consumer. It could not sue in its own  name.  Certainly  that  was  the  law  laid  down  earlier by this Court and this is also a part of  the common law. That was the position before the  National  Commission  in  Transport  Corporation  of  India  Ltd  vs.  Devangara  Cotton  Mills  Ltd.,  reported  in  1998  (2)  CPJ  16  (NC),  which  is  referred to in paragraph 16 of the judgment in  Oberai  Forwarding  Agency  (supra).  But  in  the  earlier judgment in Green Transport Co. vs. New  India Assurance Co. Ltd., (1992) 2 CPJ 349 (NC)  wherein  the  insurer  had  claimed  a  right  of  

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subrogation or transfer of the right of action  which the insured had as against the transporter.  There  it  was  held  that  the  complaint  in  the  consumer court was not maintainable. In Transport  Corporation  of  India  Ltd’s  case,  the  National  Commission  distinguished  the  judgment  in  Green  Transport Co., wherein the complaint was held not  to be maintainable. In other words, this Court in  Oberai Forwarding Agency’s case (supra) felt that  where  there  was  an  assignment  in  addition  to  subrogation,  the  complaint  was  not  maintainable  even though the original consumer as well as the  Insurance  Company  to  whom  the  rights  stood  subrogated  and  assigned  were  the  complainants.  The crucial reasoning is set out in paragraphs 23  and  24  of  the  judgment  in  Oberai  Forwarding  Agency  (supra)  which  we  have  already  set  out  above.  

So far as paragraph 23 of the said judgment is  concerned, it states that in case the right to  recover  the  compensation  is  assigned  to  the  Insurance Company, there is no question of the  Insurance  Company  being  a  ‘beneficiary’  of  the  services which the consumer had hired through the  transport  company.  Hence,  section  2(b)  of  the  Consumer  Protection  Act,  1988  would  not  apply.  This Court also observed that ‘service’ namely,  the transportation of the consignment had already  availed of by the consumer. The Insurance Company  therefore, was not a consumer within the meaning  of the provisions of the Consumer Protection Act,  1986 and therefore, not entitled to maintain the  complaint.  

It is contended for the appellant, relying on the  above passages (para 23 in Oberai) that once the  goods are handed over to a transporter for the  purpose of transport, the services have already  been rendered and that therefore, the consignor  ceases to be a consumer. But it is pointed out  for the respondent that the contract between the  consumer and the transport company is to safely  transport  the  goods  through  he  entire  distance  and hand them over for delivery to the consignee  at the opposite end. If the goods have been lost  during transport, services are not fully rendered  

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–  and  a  cause  of  action  has  arisen  to  the  consignor  (consumer)  to  recover  the  same,  the  consignor continues to be a consumer after the  services  are  rendered  and  will  be  a  consumer  entitled  to  compensation  (rather  than  goods)  against the transport company. He does not, it is  contended  for  the  respondent,  cease  to  be  consumer. There is a breach of contract and the  right  of  the  consignor  is  to  recover  compensation. If, therefore, at such a stage the  consignor is still a consumer entitled to sue for  compensation,  he  is  certainly  entitled  in  that  capacity  to  move  the  consumer  court  as  a  complainant. That is how it is contended for the  respondents that the consignor is in the position  of a co-complainant.  

So far as assignment of the rights in favour of  the  insurance  company  is  concerned,  it  is  contended  for  the  respondents  that  one  has  to  keep in mind that a simple assignment of a right  to recover may, in law be bad, on the ground of  ‘champerty/maintenance’ and that is why, in these  formats,  it  is  coupled  with  subrogation.  Once  there  is  subrogation  the  insurance  company  is  suing  in  the  consignor’s  right  as  ‘consumer’  because  the  consignor  has  not  got  the  full  services rendered in his favour, the goods not  having  reached  their  destination.  An  assignment  coupled with rights of subrogation would be valid  in law because then it will not be a case of a  mere assignment of a right to sue.  

In other words, on the date when the assignment  is  made,  the  consignor  namely  the  consumer  is  still a consumer who has lost his goods and he is  entitled  to  compensation  for  the  loss  of  the  goods  by  the  transport  company.  Once  the  consignor receives the money from the Insurance  company, the insurance company becomes subrogated  as  an  indemnifier  to  all  the  rights  of  the  consumer  including  the  right  to  sue  as  a  consumer. But the complaint must then be in the  name  of  the  consignor.  In  fact,  that  is  the  precise  position  on  Transport  Corporation  of  India Ltd. Vs. Davangere Cotton Mills Ltd. – 1998  (2) CPJ 16. It was held that the consignor could  

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still  sue  notwithstanding  the  fact  that  compensation was paid by the insurance company.  The only extra thing that happens in the event  of  the  assignment  in  favour  of  the  insurance  company  is  that  the  insurance  company  becomes  entitled to file the complaint in its own name by  virtue of the assignment. The insurance company  may not be a consumer to start with but it is  subrogated  to  the  rights  of  the  consumer  (consignor)  to  whom  services  were  not  fully  rendered.  

When we came to paragraph 24 of the judgment in  Oberai  Forwarding  Agency  (supra),  it  is  stated  that upon the transfer by assignment of all the  rights of the consumer in favour of the insurance  company,  the  consumer  retained  no  right  to  recover compensation for the loss of consignment  and therefore, the addition of the consignee as a  co-complainant  does  not  make  the  complaint  maintainable. It is contended for the respondents  that the law is well settled that there cannot be  a bare assignment of a right to sue. But if such  a right is coupled with the right of subrogation  the action is maintainable by the assignee, who  is suing for those rights and who need no longer  implead the consignor. In fact, the principle in  Transport  Corporation  of  India  Ltd.,  which  has  been  accepted  by  the  three  Judge  Bench  itself  says that if there is subrogation, the insurance  company could sue in the name of consignor. The  effect of the assignment is not to destroy the  character of the insurance company as a person  entitled to the rights of the consumer (because  of  subrogation)  but  also  to  provide  an  independent right to sue in its own name. Merely,  because there is an assignment it does not follow  that  the  complainant  –  insurer  was  not  also  clothed  with  the  rights  of  the  consignor  as  a  consumer,  if  on  the  date  of  assignment  the  consignor was still entitled to compensation  as  consignor. The reasoning in paragraph 24 of the  judgment appears to be closely intertwined with  the  reasoning  in  paragraph  23.  As  long  as  the  goods had not been delivered, the consignor does  not  lose  the  right  to  claim  compensation  as  a  consumer and he still remains the consignor and  

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to  that  rights,  the  Insurance  company  becomes  subrogated.  It  is  contended  for  the  respondent  that  thus  the  insurance  company  is  having  the  rights of the consignor as consumer by virtue of  the rights subrogated to it and is also entitled  to maintain the complaint as an assignee in its  own right.  

It is pointed out for the respondents that, in  fact,  the  result  of  the  judgment  of  the  three  judge bench has been that a large number of cases  which  have  been  decreed  in  favour  of  the  consignees  in  various  consumer  fora   in  this  country  have  been  rendered  infructuous.  The  insurance  company  and  the  consignors  became  compelled   to  move  the  civil  court  once  again  after several years and to seek the benefit of  section 14 of the Limitation Act. There was no  other benefit accruing to the transporter. It is  contended that a purposeful interpretation is to  be  given  to  the  provisions  of  the  Consumer  Protection  Act  and  one  of  the  purpose  is  that  consumers  might  get  expeditious  relief  outside  the civil courts.  

It is contended alternatively that looking at the  matter from another angle, the insurance company  as a third party – indemnifier pays compensation  to  the  consumer  and  redresses  an  immediate  grievance and makes the insured to go back into  this  business.  In  such  a  situation,  merely  because a third party indemnifier pays money to  the insured, the latter does not cease to be a  consumer  and  the  status  of  the  consignor  as  a  consumer  still  continues.  Because  there  is  a  breach  of  contract  the  consumer  can  sue  for  compensation   along  with  the  insurance  company  and  does  not  lose  his  right  to  sue  for  compensation.  The  right  to  sue  before  the  consumer  court  is  available  either  with  the  consignor  or  with  the  consignee  and  does  not  vanish into thin air, in spite of the assignor  and  assignee  being  co-complainants.  In  this  connection, the decision in Compania Colombia De  Sequros  vs.  Pacific  Steam  Navigation  Co.  etc.,  reported in 1964 (1) ALL ER 216 is also relied  upon for the respondent. It contains an extensive  

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discussion  of  the  point  involved.  There  the  assignment  was  obtained  after  the  accident  and  after the Insurance Company paid the money to the  consignor.  

In  our  view,  the  above  contention  of  the  respondent are substantial and a case is made out  for reconsideration of Oberai Forwarding Agency.  

 7. The appellant contends that Oberai lays down the law  

correctly. It is submitted that what is executed in favour  

of  the  Insurer,  though  termed  a  ‘subrogation’  is  an  

assignment, and therefore, the Insurer was not entitled to  

maintain the complaint. Relying on the observations in para  

23 of Oberai Forwarding Agency, it was contended that once  

the  goods  entrusted  to  the  appellant  for  transportation  

were lost/damaged, no ‘service’ remained to be rendered or  

performed  by  the  appellant  as  carrier;  that  what  was  

assigned and transferred by the Assured to the Insurer was  

only the right to recover compensation for the loss and  

there was no question of Insurer being the beneficiary of  

any service, for which the Assured had hired the appellant;  

and  therefore  such  post-loss  assignment  of  the  right  to  

recover  compensation,  did  not  result  in  the  Insurer  

becoming a ‘consumer’ under the Act. The Respondents, on  

the  other  hand,  contended  that  the  decision  in  Oberai  

required reconsideration on several grounds, set out in the  

reference order.  

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8. On  the  contentions  urged,  the  following  questions  

arise for consideration:  

(a) Where the letter of subrogation executed by an assured  in favour of the insurer contains, in addition to words  referring  to  subrogation,  terms  which  may  amount  to  an  assignment, whether the document ceases to be a subrogation  and becomes an assignment?  

(b)  Where  the  insurer  pays  the  amount  of  loss  to  the  assured,  whether  the  insurer  as  subrogee,  can  lodge  a  complaint under the Act, either in the name of the assured,  or in the joint names of the insurer and assured as co- complainants?  

(c) Where the rights of the assured in regard to the claim  against the carrier/service provider are assigned in favour  of  the  insurer  under  a  letter  of  subrogation-cum- assignment, whether the insurer as the assignee can file a  complaint either in its own name, or in the name of the  assured, or by joining the assured as a co-complainant.  

(d) Whether relief could be granted in a complaint against  the carrier/service provider, in the absence of any proof  of negligence?  

Re : Questions (a) to (c) and the correctness of Oberai  

9. A ‘complaint’, in the context of this case, refers to  

an  allegation  in  writing  made  by  a  ‘consumer’  that  the  

services availed of or hired (or agreed to be availed of or  

hired)  suffer  from  ‘deficiency’  in  any  respect  (vide  

section 2(c) of the Act). A ‘consumer’ is defined under  

section  2(d)  of  the  Act,  relevant  portion  of  which  is  

extracted below :  

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“Consumer” means any person who –  

x x x x x (ii) hires or avails of any services for a  consideration which has been paid or promised or  partly  paid  any  partly  promised,  or  under  any  system  of  deferred  payment  and  includes  and  beneficiary  of  such  services  other  than  the  person who hires or avails of the services for  consideration paid or promised or partly paid and  partly promised, or under any system of deferred  payment, when such services are availed of with  the approval of the first mentioned person …….”  

“Deficiency”  means  any  fault,  imperfection,  short-coming,  

or  inadequacy  in  the  quality,  nature  and  manner  of  

performance which is required to be maintained by or under  

any law for the time being in force or has been undertaken  

to be performed by a person in pursuance of a contract or  

otherwise in relation to any service (vide section 2(g) of  

the Act).  

10. The  assured  entrusted  the  consignment  for  

transportation to the carrier. The consignment was insured  

by  the  assured  with  the  insurer.  When  the  goods  were  

damaged  in  an  accident,  the  assured,  as  the  consignor-

consumer, could certainly maintain a complaint under the  

Act, seeking compensation for the loss, alleging negligence  

and deficiency in service. The fact that in pursuance of a  

contract of insurance, the assured had received from the  

insurer, the value of the goods lost, either fully or in  

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part,  does  not  erase  or  reduce  the  liability  of  the  

wrongdoer responsible for the loss. Therefore, the assured  

as a consumer, could file a complaint under the Act, even  

after the insurer had settled its claim in regard to the  

loss.  

11. A contract of insurance is a contract of indemnity.  

The  loss/damage  to  the  goods  covered  by  a  policy  of  

insurance, may be caused either due to an act for which the  

owner (assured) may not have a remedy against any third  

party (as for example when the loss is on account of an act  

of God) or due to a wrongful act of a third party, for  

which he may have a remedy against such third party (as for  

example where the loss is on account of negligence of the  

third  party).  In  both  cases,  the  assured  can  obtain  

reimbursement of the loss, from the insurer. In the first  

case, neither the assured, nor the insurer can make any  

claim against any third party. But where the damage is on  

account of negligence of a third party, the assured will  

have the right to sue the wrongdoer for damages; and where  

the assured has obtained the value of the goods lost from  

the insurer in pursuance of the contract of insurance, the  

law of insurance recognizes as an equitable corollary of  

the principle of indemnity that the rights and remedies of  

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the assured against the wrong-doer stand transferred to and  

vested  in  the  insurer.  The  equitable  assignment  of  the  

rights  and  remedies  of  the  assured  in  favour  of  the  

insurer,  implied  in  a  contract  of  indemnity,  known  as  

‘subrogation’, is based on two basic principles of equity :  

(a) No tort-feasor should escape liability for his wrong;  

(b) No unjust enrichment for the injured, by recovery of  

compensation for the same loss, from more than one source.  

The doctrine of subrogation will thus enable the insurer,  

to  step  into  the  shoes  of  the  assured,  and  enforce  the  

rights and remedies available to the assured.

12. 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.”

Black’s  Law  Dictionary  also  extracts  two  general  

definitions  of  ‘subrogation’.  The  first  is  from  Dan  B.  

Dobb’s Law of Contract (2nd Edn. - # 4.3 at 404) which reads  

thus :  

“Subrogation  simply  means  substitution  of  one  person  for  another;  that  is,  one  person  is  allowed  to  stand  in  the  shoes  of  another  and  assert  that  person’s  rights  against  the  

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defendant.  Factually,  the  case  arises  because,  for  some  justifiable  reason,  the  subrogation  plaintiff has paid a debt owed by the defendant.”

The second is from Laurence P. Simpson’s Handbook on Law of  

Suretyship (1950 Edn. Page 205) which reads thus :  

“Subrogation  is  equitable  assignment.  The  right  comes  into  existence  when  the  surety  becomes  obligated,  and  this  is  important  as  affecting  priorities,  but  such  right  of  subrogation  does  not become a cause of action until the debt is  duly paid. Subrogation entitles the surety to use  any  remedy  against  the  principal  which  the  creditor could have used, and in general to enjoy  the benefit of any advantage that the creditor  had, such as a mortgage, lien, power to confess  judgment,  to  follow  trust  funds,  to  proceed  against a third person who has promised either  the principal or the creditor to pay the debt.”

‘Right  of  Subrogation’  is  statutorily  recognized  and  

described in section 79 of the Marine Insurance Act, 1963  

as follows:  

(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, the 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  and  in  respect  of  the  subject  

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matter insured as from the time of the casualty  causing the loss, in so far as the assured has  been indemnified, according to this Act, by such  payment for the loss”.  

Section 140 of Contract Act, 1872, deals with the principle  

of  subrogation  with  reference  to  rights  of  a  

Surety/Guarantor. It reads :  

“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 been 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 concept of subrogation was explained in the following  

manner by Chancellor Boyd in National Fire Insurance Co.  

vs. McLaren – 1886 (12) OR 682 :  

“The  doctrine  of  subrogation  is  a  creature  of  equity not founded on contract, but arising out  of  the  relations  of  the  parties.  In  cases  of  insurance where a third party is liable to make  good the loss, the right of subrogation depends  upon  and  is  regulated  by  the  broad  underlying  principle  of  securing  full  indemnity  to  the  insured, on the one hand, and on the other of  holding  him  accountable  as  trustee  for  any  advantage  he  may  obtain  over  and  above  compensation  for  his  loss.  Being  an  equitable  rights, it partakes of all the ordinary incidents  of  such  rights,  one  of  which  is  that  in  administering relief the Court will regard not so  much  the  form  as  the  substance  of  the  transaction. The primary consideration is to see  that the insured gets full compensation for the  property destroyed and the expenses incurred in  

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making good his loss. The next thing is to see  that he holds any surplus for the benefit of the  insurance company.”  

In Banque Financiere de la Cite vs. Parc (Battersea) Ltd.  

[1999  (1)  A.C.221],  the  House  of  Lords  explained  the  

difference  between  subrogations  arising  from  express  or  

implied agreement of the parties:

“….there  was  no  dispute  that  the  doctrine  of  subrogation  in  insurance  rests  upon  the  common  intention of the parties and gives effect to the  principle of indemnity embodied in the contract.  Furthermore, your Lordships drew attention to the  fact  that  it  is  customary  for  the  assured,  on  payment of the loss, to provide the insurer with  a letter of subrogation, being no more nor less  than  an  express  assignment  of  his  rights  of  recovery against any third party. Subrogation in  this sense is a contractual arrangement for the  transfer of rights against third parties and is  founded upon the common intention of the parties.  But  the  term  is  also  used  to  describe  an  equitable  remedy  to  reverse  or  prevent  unjust  enrichment which is not based upon any agreement  or common intention of the party enriched and the  party  deprived.  The  fact  that  contractual  subrogation  and  subrogation  to  prevent  unjust  enrichment  both  involve  transfers  of  rights  or  something  resembling  transfers  of  rights  should  not be allowed to obscure the fact that one is  dealing  with  radically  different  institutions.  One is part of the law of contract and the other  part of the law of restitution.”

13. An  ‘assignment’  on  the  other  hand,  refers  to  a  

transfer  of  a  right  by  an  instrument  for  consideration.  

When there is an absolute assignment, the assignor is left  

with no title or interest in the property or right, which  

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is  the  subject  matter  of  the  assignment.  The  difference  

between  ‘subrogation’  and  ‘assignment’  was  stated  in  

Insurance Law by MacGillivray & Parkington (7th Edn.) thus :  

“Both subrogation and assignment permit one party  to enjoy the rights of another, but it is well  established that subrogation is not a species of  assignment.  Rights  of  subrogation  vest  by  operation of law rather than as the product of  express agreement. Whereas rights of subrogation  can be enjoyed by the insurer as soon as payment  is made, as assignment requires an agreement that  the  rights  of  the  assured  be  assigned  to  the  insurer. The insurer cannot require the assured  to assign to him his rights against third parties  as  a  condition  of  payment  unless  there  is  a  special clause in the policy obliging the assured  to do so. This distinction is of some importance,  since in certain circumstances an insurer might  prefer  to  take  an  assignment  of  an  assured’s  rights  rather  than  rely  upon  his  rights  of  subrogation.  If,  for  example,  there  was  any  prospect  of  the  insured  being  able  to  recover  more than his actual loss from a third party, an  insurer,  who  had  taken  an  assignment  of  the  assured’s rights, would be able to recover the  extra money for himself whereas an insurer who  was confined to rights of subrogation would have  to allow the assured to retain the excess.

Another  distinction  lies  in  the  procedure  of  enforcing the rights acquired by virtue of the  two  doctrines.  An  insurer  exercising  rights  of  subrogation against third parties must do so in  the name of the assured. An insurer who has taken  a legal assignment of his assured’s rights under  statue should proceed in his own name …”

The  difference  between  subrogation  and  assignment  was  

highlighted by the Court of Appeals thus in James Nelson &  

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Sons Ltd. Vs. Nelson Line (Liverpool) Ltd. (No.1) – 1906  

(2) KB 217 :  

“The  way  in  which  the  underwriters  come  in  is  only by way of subrogation to the rights of the  assured. Their right is not that of assignees of  the cause of action; ….. Therefore, they could  only  be  entitled  by  way  of  subrogation  to  the  plaintiffs’ rights. What is the nature of their  right by way of subrogation? It is the right to  stand in the shoes of the persons whom they have  indemnified,  and  to  put  in  force  the  right  of  action  of  those  persons;  but  it  remains  the  plaintiffs’  right  of  action,  although  the  underwriters are entitled to deduct from any sum  recovered  the  amount  to  which  they  have  indemnified the plaintiffs, and although they may  have provided the means of conducting the action  to a termination. It is not a case in which one  person is using the name of another merely as a  nominal plaintiff for the purpose of bringing an  action in which he alone is really interested;  for the plaintiffs here have real and substantial  interest of their own in the action.”

The difference between assignment and subrogation was also  

explained by the Madras High Court in Vasudeva Mudaliar vs.  

Caledonian Insurance Co. – [AIR 1965 Mad. 159] thus :  

“In other words arising out of the nature of a  contract of indemnity, the insurer, when he has  indemnified  the  assured,  is  subrogated  to  his  rights  and  remedies  against  third  parties  who  have  occasioned  the  loss.  The  right  of  the  insurer to subrogation or to get into the shoes  of the assured as it were, need not necessarily  flow  from  the  terms  of  the  motor  insurance  policy, but is inherent in and springs from the  principles of indemnity.  

Where, therefore, an insurer is subrogated to the  rights and remedies of the assured, the former is  to be more or less in the same position as the  

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assured  in  respect  of  third  parties  and  his  claims against them founded on tortuous liability  in  cases  of  motor  accidents.  But  it  should  be  noted that the fact that an insurer is subrogated  to the rights and remedies of the assured of the  assured  does  not  ipso  jure  enable  him  to  sue  third  parties  in  his  own  name.  It  will  only  entitle the insurer to sue in the name of the  assured, it being an obligation of the assured to  lend his name and assistance to such an action.  By subrogation, the insurer gets no better rights  or  no  different  remedies  than  the  assured  himself.  Subrogation  and  its  effect  are  therefore, not to be mixed up with those of a  transfer or any assignment by the assured of his  rights and remedies to the insurer. An assignment  or  a  transfer  implies  something  more  than  subrogation,  and  vests  in  the  insurer  the  assured’s  interest,  rights  and  remedies  in  respect of the subject matter and substance of  the  insurance.  In  such  a  case,  therefore,  the  insurer, by virtue of the transfer or assignment  in his favour, will be in a position to maintain  a suit in his own name against third parties.”  

14. Subrogation, as an equitable assignment, is inherent,  

incidental and collateral to a contract of indemnity, which  

occurs automatically, when the insurer settles the claim  

under the policy, by reimbursing the entire loss suffered  

by the assured. It need not be evidenced by any writing.  

But  where  the  insurer  does  not  settle  the  claim  of  the  

assured fully, by reimbursing the entire loss, there will  

be  no  equitable  assignment  of  the  claim  enabling  the  

insurer to stand in the shoes of the assured, but only a  

right to recover from the assured, any amount remaining out  

of  the  compensation  recovered  by  the  assured  from  the  

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wrongdoer, after the assured fully recovers his loss. To  

avoid  any  dispute  with  the  assured  as  to  the  right  of  

subrogation and extent of its rights, the insurers usually  

reduce the terms of subrogation into writing in the form of  

a Letter of Subrogation which enables and authorizes the  

insurer  to  recover  the  amount  settled  and  paid  by  the  

insurer, from the third party wrong-doer as a Subrogee-cum-

Attorney. When the insurer obtains an instrument from the  

assured on settlement of the claim, whether it will be a  

deed  of  subrogation,  or  subrogation-cum-assignment,  would  

depend upon the intention of parties as evidenced by the  

wording  of  the  document.  The  title  or  caption  of  the  

document, by itself, may not be conclusive. It is possible  

that the document may be styled as ‘subrogation’ but may  

contain in addition an assignment in regard to the balance  

of  the  claim,  in  which  event  it  will  be  a  deed  of  

subrogation-cum-assignment.  It  may  be  a  pure  and  simple  

subrogation but may inadvertently or by way of excessive  

caution use words more appropriate to an assignment. If the  

terms clearly show that the intention was to have only a  

subrogation,  use  of  the  words  “assign,   transfer  and  

abandon in favour of” would in the context be construed as  

referring to subrogation and nothing more.   

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15. We may, therefore, classify subrogations under three  

broad categories: (i) subrogation by equitable assignment;  

(ii)  subrogation  by  contract;  and  (iii)  subrogation-cum-

assignment.  

15.1) In  the  first  category,  the  subrogation  is  not  

evidenced by any document, but is based on the insurance  

policy and the receipt issued by the assured acknowledging  

the  full  settlement  of  the  claim  relating  to  the  loss.  

Where the insurer has reimbursed the entire loss incurred  

by the assured, it can sue in the name of the assured for  

the amount paid by it to the assured. But where the insurer  

has reimbursed only a part of the loss, in settling the  

insurance claim, the insurer has to wait for the assured to  

sue and recover compensation from the wrongdoer; and when  

the assured recovers compensation, the assured is entitled  

to first appropriate the same towards the balance of his  

loss (which was not received from the insurer) so that he  

gets full reimbursement of his loss and the cost, if any,  

incurred  by  him  for  such  recovery.  The  insurer  will  be  

entitled  only  to  whatever  balance  remaining,  for  

reimbursement of what it paid to the assured.  

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15.2) In  the  second  category,  the  subrogation  is  

evidenced by an instrument. To avoid any dispute about the  

right to claim reimbursement, or to settle the priority of  

inter-se claims or to confirm the quantum of reimbursement  

in pursuance of the subrogation, and to ensure co-operation  

by the assured in suing the wrongdoer, the insurer usually  

obtains a letter of subrogation in writing, specifying its  

rights vis-à-vis the assured. The letter of subrogation is  

a contractual arrangement which crystallizes the rights of  

the  insurer  vis-à-vis  the  assignee.  On  execution  of  a  

letter  of  subrogation,  the  insurer  becomes  entitled  to  

recover in terms of it, a sum not exceeding what was paid  

by it under the contract of insurance by suing in the name  

of the assured. Even where the insurer had settled only a  

part of the loss incurred by the assured, on recovery of  

the  claim  from  the  wrongdoer,  the  insurer  may,  if   the  

letter of subrogation so authorizes, first appropriate what  

it had paid to the assured and pay only the balance, if  

any, to the assured.  

15.3) The third category is where the assured executes  

a letter of subrogation-cum-assignment enabling the insurer  

retain the entire amount recovered (even if it is more than  

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what was paid to the assured) and giving an option to sue  

in the name of the assured or to sue in its own name.

In all three types of subrogation, the insurer can sue the  

wrongdoer in the name of the assured. This means that the  

insurer requests the assured to file the suit/complaint and  

has the option of joining as co-plaintiff. Alternatively  

the insurer can obtain a special power of Attorney from the  

assured and then to sue the wrongdoer in the name of the  

assured as his attorney.  

The assured has no right to deny the equitable right of  

subrogation  of  the  insurer  in  accordance  with  law,  even  

whether there is no writing to support it. But the assured  

whose claim is settled by the insurer, only in respect of a  

part  of  the  loss  may  insist  that  when  compensation  is  

recovered from the wrongdoer he will first appropriate the  

same, to recover the balance of his loss. The assured can  

also refuse to execute a subrogation-cum-assignment which  

has  the  effect  of  taking  away  his  right  to  receive  the  

balance of the loss. But once a subrogation is reduced to  

writing,  the  rights  inter-se  between  the  assured  and  

insurer will be regulated by the terms agreed, which is a  

matter of negotiation between the assured and insurer.

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16. If  a  letter  of  subrogation  containing  terms  of  

assignment  is  to  be  treated  only  as  an  assignment  by  

ignoring  the  subrogation,  there  may  be  the  danger  of  

document itself becoming invalid and unenforceable, having  

regard to the bar contained in section 6 of the Transfer of  

Property  Act,  1882  (‘TP  Act’  for  short).   Section  6  of  

Transport of Property Act, 1882, provides that property of  

any kind may be transferred except as otherwise provided by  

that Act or by any other law for the time being in force.  

Clause (e) of the said section provides that mere right to  

sue cannot be transferred. Section 130 provides the manner  

of  transfer  of  actionable  claims.  Section  3  defines  an  

‘actionable claim’ as : (i) any debt (other than a debt  

secured  by  mortgage  of  immovable  property  or  by  

hypothecation or pledge of movable property) or  (ii) any  

beneficial  interest  is  movable  property  not  in  the  

possession, either  actual or constructive of the claimant,  

which the civil courts recognizes as affording grounds for  

relief.  A ‘debt’ refers to an ascertained sum due from one  

person to another, as contrasted from unliquidated damages  

and  claims  for  compensation  which  requires  

ascertainment/assessment by a Court or Tribunal before it  

becomes due and payable. A transfer or assignment of a mere  

right to sue for compensation will be invalid having regard  

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to  section  6(e)  of  the  TP  Act.  But  when  a  letter  of  

subrogation-cum-assignment  is  executed,  the  assignment  is  

interlinked with subrogation, and not being an assignment  

of a mere right to sue, will be valid and enforceable.

17. The principles relating to subrogation can therefore  

be summarized thus :  

(i) 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 wrong- doer.  

(ii) Subrogation does not terminate nor puts an end to the  right of the assured to sue the wrong-doer and recover the  damages for the loss. Subrogation only entitles the insurer  to receive back the amount paid to the assured, in terms of  the principles of subrogation.

(iii) Where  the  assured  executes  a  Letter  of  Subrogation, reducing the terms of subrogation, the rights  of the insurer vis-à-vis the assured will be governed by  the terms of the Letter of Subrogation.  

(iv) A  subrogation  enables  the  insurer  to  exercise  the  rights of the assured against third parties in the name of  the  assured.  Consequently,  any  plaint,  complaint  or  petition for recovery of compensation can be filed in the  name of the assured, or by the assured represented by the  insurer as subrogee-cum-attorney, or by the assured and the  insurer as co-plaintiffs or co-complainants.  

(v) Where  the  assured  executed  a  subrogation-cum- assignment in favour of the insurer (as contrasted from a  subrogation),  the  assured  is  left  with  no  right  or  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  

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the choice of suing in its own name, or in the name of the  assured, if the instrument so provides. The insured becomes  entitled  to  the  entire  amount  recovered  from  the  wrong- doer, that is, not only the amount that the insured 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.  

18. We  may  clarify  the  position  with  reference  to  the  

following  illustration:  The  loss  to  the  assured  is  

Rs.1,00,000/-. The insurer settles the claim of the assured  

for  Rs.75,000/-.  The  wrong-doer  is  sued  for  recovery  of  

Rs.1,00,000/-.

Where there is no letter of subrogation and insurer relies  on  the  equaitable  doctrine  of  subrogation  (The  suit  is  filed by the assured)

(i) If  the  suit  filed  for  recovery  of  Rs.100,000/-  is  

decreed as prayed, and the said sum of Rs.1,00,000/- is  

recovered, the assured would appropriate Rs. 25,000/- to  

recover the entire loss of Rs. 100,000/- and the doctrine  

of  subrogation  would  enable  the  insurer  to  claim  and  

receive the balance of Rs.75,000  

(ii) If  the  suit  filed  for  recovery  of  Rs.100,000/-  is  

decreed as prayed for, but the assured is able to recover  

only Rs.50,000/- from the Judgment-Debtor (wrong-doer), the  

assured will be entitled to appropriate Rs.25,000/- (which  

is the shortfall to make up Rs.100,000/- being the loss)  

and  the  insurer  will  be  entitled  to  receive  only  the  

balance  of  Rs.  25,000/-  even  though  it  had  paid  Rs.  

75,000/- to the assured.

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(iii) Where,  the  suit  is  filed  for  recovery  of  

Rs.100,000/-  but  the  court  assesses  the  loss  actually  

suffered by the assured as only Rs.75,000/- (as against the  

claim  of  the  assured  that  the  value  of  goods  lost  is  

Rs.100,000/-) and then awards Rs.75,000/- plus costs, the  

insurer will be entitled to claim and receive the entire  

amount  of  Rs.75,000/-  in  view  of  the  doctrine  of  

subrogation.  

Where  the  assured  executes  a  letter  of  subrogation  entitling the insurer to recover Rs. 75,000/-   (The suit  is  filed  in  the  name  of  the  assured  or  jointly  by  the  assured and insurer).

(iv) If the suit is filed for recovery of Rs.1,00,000/-,  

and  if  the  court  grants  Rs.1,00,000/-,  the  insurer  will  

take Rs.75,000/- and the assured will take Rs.25,000/-.  

(v) If the insurer sues in the name of the assured for  

Rs.75,000/-  and  recovers  Rs.75,000/-,  the  insurer  will  

retain the entire sum of Rs.75,000/- in pursuance of the  

Letter  of  Subrogation,  even  if  the  assured  has  not  

recovered the entire loss of Rs.1,00,000/-. If the assured  

wants to recover the balance of the loss of Rs.25,000/- as  

he had received only Rs. 75,000/- from the insurer, the  

assured should ensure that the claim is made against the  

wrongdoer for the entire sum of Rs.100,000/- by bearing the  

proportionate expense. Otherwise the insurer will sue in  

the name of the assured for only for Rs. 75,000/-.

(vi) If the letter of subrogation executed by the assured  

when the insurer settles the claim of the assured uses the  

words  that  the  “assured  assigns,  transfers  and  abandons  

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unto the insurer, the right to get Rs.75,000/- from the  

wrong-doer”, the document will be a ‘subrogation’ in spite  

of the use of words ‘transfers, assigns and abandons’. This  

is  because  the  insurer  has  settled  the  claim  for  

Rs.75,000/- and the instrument merely entitles the insurer  

to receive the said sum of Rs.75,000/- which he had paid to  

the assured, and nothing more.

Where  the  assured  executes  a  letter  of  subrogation-cum- assignment for Rs.100,000/-  

(vii) If the document executed by the assured in favour  

of  the  insured  provides  that  in  consideration  of  the  

settlement of the claim for Rs.75,000/-, the assured has  

transferred  and  assigned  by  way  of  subrogation  and  

assignment, the right to recover the entire value of the  

goods  lost  and  retain  the  entire  amount  without  being  

accountable to the assured for any excess recovered (over  

and above Rs.75,000/-) and provides that the insurer may  

sue in the name of the assured or sue in its own name  

without  reference  to  the  assured,  the  instrument  is  a  

subrogation-cum-assignment and the insurer has the choice  

of either suing in the name of the assured or in its own  

name.

Where the assured executes a letter of assignment in favour  of a third party to sue and recover from the carrier, the  value of the consignment

(viii) If the assured, having received Rs.75,000/- from  

the insurer, executes an instrument in favour of a third  

party (not being the insurer) assigning the right to sue  

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and  recover  from  the  carrier,  damages  for  loss  of  the  

consignment,  such  a  document  will  be  an  Assignment.  The  

assignee cannot file a complaint before the consumer fora,  

as he is not a ‘consumer’. Further, such a document being a  

transfer  of  a  mere  right  to  sue,  will  be  void  and  

unenforceable, having regard to  section 6(e) of Transfer  

of Property Act, 1882. It is well settled that a right to  

sue for unliquidated damages for breach of contract or for  

tort, not being a right connected with the ownership of any  

property, nor being a right to sue for a debt or actionable  

claim, is a mere right to sue and is incapable of being  

transferred.  

19. Whether the document executed by the assured in favour  

of  the  insurer  is  a  subrogation  simpliciter,  or  a  

subrogation-cum-assignment  is  relevant  only  in  a  dispute  

between the assured and the insurer. It may not be relevant  

for deciding the maintainability of a complaint under the  

Act. If the complaint is filed by the assured (who is the  

consumer), or by the assured represented by the insurer as  

its  attorney  holder,  or  by  the  assured  and  the  insurer  

jointly  as  complainants,  the  complaint  will  be  

maintainable, if the presence of insurer is explained as  

being a subrogee. Whether the amount claimed is the total  

loss or only the amount for which the claim was settled  

would  make  no  difference  for  the  maintainability  of  the  

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complaint,  so  long  as  the  consumer  is  the  complainant  

(either personally or represented by its attorney holder)  

or  is  a  co-complainant  along  with  his  subrogee.  On  the  

other hand, if the assured (who is the consumer) is not the  

complainant, and the insurer alone files the complaint in  

its own name, the complaint will not be maintainable, as  

the insurer is not a ‘consumer’, nor a person who answers  

the  definition  of  ‘complainant’  under  the  Act.  The  fact  

that  it  seeks  to  recover  from  the  wrongdoer  (service  

provider) only the amount paid to the assured and not any  

amount in excess of what was paid to the assured will also  

not make any difference, if the assured – consignor is not  

the complainant or co-complainant. The complaint will not  

be  maintainable  unless  the  requirements  of  the  Act  are  

fulfilled.   The  remedy  under  the  Act  being  summary  in  

nature, once the consumer is the complainant or is a co-

complainant,  it  will  not  be  necessary  for  the  Consumer  

Forum to probe the exact nature of relationship between the  

consumer (assured) and the insurer, in a complaint against  

the service provider.

20. In this context, it is necessary to remember that the  

nature  of  examination  of  a  document  may  differ  with  

reference  to  the  context  in  which  it  is  examined.  If  a  

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document  is  examined  to  find  out  whether  adequate  stamp  

duty has been paid under the Stamp Act, it will not be  

necessary  to  examine  whether  it  is  validly  executed  or  

whether it is fraudulent or forged.  On the other hand, if  

a  document  is  being  examined  in  a  criminal  case  in  the  

context  of  whether  an  offence  of  forgery  has  been  

committed, the question for examination will be whether it  

is forged or fraudulent, and the issue of stamp duty or  

registration  will  be  irrelevant.  But  if  the  document  is  

sought to be produced and relied upon in a civil suit, in  

addition to the question whether it is genuine, or forged,  

the question whether it is compulsorily registrable or not,  

and the question whether it bears the proper stamp duty,  

will become relevant. If the document is examined in the  

context of a dispute between the parties to the document,  

the nature of examination will be to find out that rights  

and obligation of one party vis-à-vis the other party. If  

in a summary proceedings by a consumer against a service  

provider, the insurer is added as a co-complainant or if  

the insurer represents the consumer as a power of attorney,  

there is no need to examine the nature of rights inter-se  

between the consumer and his insurer. When the complaint is  

by the consignor – consumer, with or without the insurer as  

a co-complainant, the service provider cannot require the  

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consumer  forum  to  consider  the  nature  of  relationship  

between the assured and the insurer or the nature and true  

purport  of  the  document  produced  as  a  letter  of  

subrogation.   A  wrong-doer  cannot  sidetrack  the  issue  

before the consumer forum. Once the ‘consumer’, that is the  

assured,  is  the  complainant,  the  complaint  will  be  

maintainable subject to fulfillment of the requirements of  

the Act.  

21. At this juncture we should also take note of the fact  

that insurance companies, statutory corporations and banks  

use standardized forms to cover all types of situations and  

circumstances and several of the clauses in such forms may  

be wholly inapplicable to the transaction intended to be  

covered  by  the  document.  Necessarily  such  redundant  or  

inapplicable  clauses  should  be  ignored  while  trying  

examining  the  document  and  make  sense  out  of  it.  To  

demonstrate this position, we extract below the letter of  

subrogation-cum-special  power  of  attorney  dated  15.2.1996  

executed by the assured in this case, by highlighting the  

irrelevant clauses by bold letters:

“Letter of Subrogation & Special Power of Attorney”

To M/s National insurance Co.Ltd.,

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Dindigal

In consideration of your paying to us a sum of Rs.  4,47,436.00 (Rupees Four Lakhs Forty Seven Thousand  Four  Hundred  &  Thirty  Six  only)  in  respect  of  loss/damage  to  the  under  mentioned  goods  and/or  duly  payable  thereon  insured  under  policy  no.  500703/21/24/95/007  issued  by  National  Insurance  Co. Ltd., we hereby assign, transfer and abandon to  you all our actionable rights, title and interest  in and to the said goods and proceeds thereof (to  the  extent  provided  by  law)  and  all  rights  and  remedies against Railway Administration and/or sea  carriers and/or agents of Sea Carriers and/or Port  Authorities  and/or  Customs  Authorities  and/or  persons or persons whosoever is liable in respect  thereof.

We  hereby  guarantee  that  we  are  the  persons  entitled  to  enforce  the  terms  of  contracts  of  transportations set forth in the bills of lading  and/or railway receipt and/or any other documents  of title evidencing the contract of transportation  or bailment relating to land covering the property  described below for transportation or bailment and  agree to indemnify you for all and any losses and  consequences should it turn out that we are not the  persons to enforce the terms of the contract.

And  we  hereby  subrogate  to  you  that  rights  and  remedies that we have in consequence of or arising  from loss/damage to the under mentioned goods and  we further hereby grant to you full power to take  and  use  all  lawful  ways  and  means  to  demand,  recover  and  to  receive  the  said  loss/damage,  customs penalty or refund of customs duty and all  and every debt from whom it may concern.

And we also hereby authorize you to use our name in  any action or proceedings that you may bring either  in your own name or in our name in relation to any  of the matters hereby assigned, transferred and/or  abandoned to you and we undertake for ourselves to  assist  and concur  in any  matters or  proceedings  which you may deem expedient or necessary in any  such  actions  or  proceedings  and  to  execute  all  deeds, assignments and or documents including any  

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and  all  pleadings  and  releases  which  may  be  necessary therefor and generally to assist therein  by all means in our power.

We hereby authorize you to file a suit or suits in  courts of law against the Union of India owning and  representing  Indian  Railways,  the  Sea  Carriers  Charterers  Agents  of  Sea  Carriers  and/or  Port  Authorities or any other carriers and or bailees  and/or  person  or  persons,  firm  or  firms,  corporation or corporation, to recover the claim  moneys of the aforesaid claim or claims and for the  said purposes to join us as a co-plaintiffs if you  so intend. We further hereby give you authority to  sing,  declare,  verify  and  affirm  and  execute  jointly  and  severally  in  our  name  and  on  our  behalf,  plaints,  affidavits,  vakalatnamas,  petitions  and  such  other  applications  and/or  notices and documents as may be found necessary for  the commencement or continuation of proceedings to  recover the claim moneys.

We further undertake if called upon by you to do so  ourselves  to  institute  any  such  action  or  proceedings that you may direct on your behalf; it  being understood that you are to indemnify us and  any other persons whose names may necessarily be  used, against any costs, charges or expenses which  may  be  incurred  in  respect  of  any  action  or  proceeding  that  may  be  taken  by  virtue  of  this  agreement.

The payment received for herein is accepted with  the understanding that the said payment shall not  enure  to  the  benefit  of  any  carrier  or  bailees  under the provision of any contract of carriage or  otherwise;  that  in  making  the  said  payment  the  underwriter  does  not  waive  any  rights  of  subrogation  or  otherwise  against  any  carrier  or  bailee  and acceptance  of this  receipt shall  not  prejudice or take away any rights or remedies which  the said underwriter would otherwise have by virtue  of such payment.

We further agree that any moneys collected from any  carrier port authorities or any persons or persons,  shall  be  your  property,  and  if  received  in  the  

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first instance by the undersigned we undertake to  make  over  to  you  immediately  the  amount  so  received.  

We hereby further agree that in event of the loss  packages and/or contents thereof subsequently being  traced, we undertake to accept and take delivery of  the same and the claim shall then be readjusted on  the correct basis of the then loss/damage and in  the event of any refund providing to be due to the  underwriter, we undertake on demand to make such  refund to you.

We hereby appoint you, your officers and agents and  there  successors  severally  our  agents  and  attorneys-in-fact with irrevocable power to collect  any and all such claims and to begin, prosecute,  compromise, arbitrate or withdraw either in our own  name or in your name but at your expense any and  all legal proceedings which you may deem necessary  to  enforce  such  claim  or  claims  including  proceedings before any international tribunal and  to execute in our name any documents which maybe  necessary to carry into effect the purpose of this  agreement,  and  for  that  purpose  we  further  authorize you to do all or any of the acts, deeds  and things herein mentioned, for us, on our behalf  and in our name.

xxxxx

(emphasis supplied)

The  use  of  the  words  “we  hereby  assign,  transfer  and  

abandon  to  you  all  our  actionable  rights,  title  and  

interest”  in  the  document,  is  in  regard  to  rights  and  

remedies  against  (1)  railway  administration  (2)  sea  

carriers (3) agents of sea carriers (4) port authorities  

(5)  customs  authorities  and  (6)  persons  whomsoever  is  

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liable in respect thereof. Even though, the matter relates  

to  carriage  of  goods  by  road,  the  claims  or  remedies  

against a road carrier are not even mentioned. Excluding  

the  irrelevant  clauses,  the  document  continues  to  be  a  

letter of subrogation.

22. A document should be transaction-specific. Or at least  

an effort should be made to delete or exclude inapplicable  

or  irrelevant  clauses.  But  where  a  large  number  of  

documentation  is  required  to  be  done  by  officers  not-

conversant with the nuances of drafting, use of standard  

forms  with  several  choices  or  alternative  provisions  is  

found  necessary.  The  person  preparing  the  document  is  

required  to  delete  the  terms/clauses  which  are  

inapplicable. But that is seldom done. The result is that  

the documents executed in standard forms will have several  

irrelevant  clauses.  Computerisation  and  large  legal  

departments should have enabled insurance companies, banks  

and  financial  institutions  to  (i)  improve  their  

documentation processes and omit unnecessary and repetitive  

clauses;  (ii)  avoid  incorporation  of  other  documents  by  

vague references; and (iii) discontinue pasting or annexing  

of slips. But that is seldom done. If documents are clear,  

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specific and self-contained, disputes and litigations will  

be considerably reduced.  

23. Let  us  now  consider  the  decision  in  Oberai.  The  

assured therein had executed two documents in favour of the  

insurer, on settlement of the claim. The first was a letter  

of  subrogation  and  the  second  was  a  special  power  of  

attorney. The letter of subrogation stated as follows :  

“In consideration of your paying to us the sum of  Rs.64,137 only in full settlement of our claim  for non-delivery/shortage and damage under Policy  No. 2142140400015 issued by you all on the under- mentioned goods, we hereby assign, transfer and  abandon to you all our rights against the Railway  Administration, road transport carriers or other  persons whatsoever, caused or arising by reason  of the said damage or loss and grant you full  power to take and use all lawful ways and means  in your own name and otherwise at your risk and  expense to recover the claim for the said damage  or loss and we hereby subrogate to you the same  rights as we have in consequence of or arising  from the said loss or damage.

And  we  hereby  undertake  and  agree  to  make  and  execute at your expense all such further deeds,  assignments and documents and to render you such  assistance as you may reasonable require for the  purpose of carrying out this agreement.”

The  special  power  of  attorney  authorized  the  insurer  to  

file a suit in court against the Railway Administration,  

for recovery of the claim on behalf of the assured, in the  

name  of  the  assured,  and  to  give  a  valid  discharge  and  

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effectual  receipt  therefor.  On  the  basis  of  the  said  

documents,  the  complaint  was  initially  filed  by  the  

insurer. Subsequently, the assured was added as a party.  

Though the claim of the assured therein was settled by the  

insurer for Rs.64,137/- as against the consignment value of  

Rs.93,925/-, the insurer appears to have sued for the full  

value  of  Rs.93,925/-  which  was  awarded  by  the  District  

Forum and affirmed by the National Commission. This Court  

held  that  where  there  is  a  subrogation  simpliciter,  the  

insurer can sue the wrong-doer in the name of the assured,  

and where there is an assignment, the insurer is entitled  

to sue the wrong-doer in his own name. This Court held that  

the  document  executed  by  the  assured  though  titled  as  

‘letter of subrogation’ was, in fact, an assignment by the  

assured of its rights in favour of the insurer. This Court  

held that the use of the following words in the document  

amounted  to  an  absolute  assignment,  as  contrasted  from  

subrogation:  

“(i) We hereby assign, transfer and abandon  to  you  all  our  rights  against  the  Railway  Administration, road transport carriers or other  persons whatsoever, caused or arising by reason  of the said damage or loss and grant you full  power to take and use all lawful ways and means  in your own name and otherwise at your risk and  expense to recover the claim for the said damage  or loss.  

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(ii) We  hereby  subrogate  to  you  the  same  rights as we have in consequence of or arising  from the said loss or damage.”  

23.1) There is no doubt that the first portion which  

stated  that  all  rights  were  assigned,  transferred  and  

abandoned in favour of the insurer and also empowered the  

insurer to sue in its own name, if read in isolation would  

amount to an assignment. But if those words are read with  

the other recitals and the words “in consideration of your  

paying to us the sum of Rs.64,137/- only in full settlement  

of our claim for non-delivery/shortage and damage, under  

policy  issued  by  you….”  make  it  clear  that  it  was  a  

subrogation-cum-assignment.  Further,  the  second  operative  

portion which states that “we hereby subrogate to you the  

same rights as we have in consequence of or arising from  

the said loss or damage” are not words of assignment. When  

the words used are : “we hereby subrogate  to you” and not  

“we  hereby  transfer  or  assign   in  your  favour”,  having  

regard  to  the  settled  meaning  of  “subrogate”,  the  said  

words could not operate as an absolute assignment, but only  

as  an  subrogation.   The  genesis  of  the  document  is  

subrogation.  The  inclusion  of  an  assignment  is  an  

additional right given to the insurer. The document did not  

cease  to  be  a  subrogation  by  reason  of  enlargement  of  

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subrogation by granting such additional right. In para 22  

of the judgment, this Court negatived the contention that  

the letter of subrogation and the special power of Attorney  

should be read together and if so read, the document would  

be a subrogation. But the special power of attorney when  

read with the term in the letter of subrogation, “we hereby  

subrogate to you the same rights as we have in consequence  

of or arising from the said loss of damage” will certainly  

show that the document was intended to be a subrogation  

also and not a mere assignment. With great respect to the  

learned Judges who decided Oberai, it has to be held that  

Oberai  was  not  correctly  decided,  as  it  held  a  

‘subrogation-cum-assignment’  as  a  mere  ‘assignment’.  It  

ignored the fact that, shorn of the cover and protection of  

subrogation, the document, if read as a simple assignment  

would fall foul of section 6(e) of Transfer of Property Act  

and thus would be unenforceable. But the ultimate decision  

in Oberai may be correct as the complaint was filed by the  

insurer, in its own name and on its own behalf making a  

claim for the entire value of the goods, in excess of what  

was paid to the assured. Though the assured was belatedly  

impleaded as a co-complainant, the nature and contents of  

the complaint was not apparently changed, and continued to  

be one by the insurer as assignee. On those peculiar facts,  

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the finding that the complaint under the Act by the insurer  

(who  was  not  a  consumer)  was  not  maintainable,  was  

justified.  

23.2) We may also refer to the frequent misconstruction  

of para 23 of the decision in Oberai by some carriers. The  

said  para  does  not  mean  that  when  the  consignment  is  

received by the carrier from the consignor and put it in  

the course of transportation, the carrier has provided the  

service  and  thereafter  either  ceases  to  be  a  service  

provider or ceases to be responsible for delivery of the  

goods, and that consequently, the consignor ceases to be a  

‘consumer’. All that para 23 of Oberai meant was that in a  

contract  for  carriage  of  goods  between  the  consignor  

(assured)  and  the  carrier,  if  the  consignor  assigns  the  

right to claim damages to an assignee, after the goods are  

lost  or  damaged,  the  assignee  cannot  claim  to  be  a  

“consumer” under the Act. It impliedly meant that if the  

assignment had been done before the loss or damage to the  

goods, then the assignment would have been in regard to  

‘property’ and not a mere right to sue, and the assignee as  

consignee would be entitled to sue the carrier. Be that as  

it may.  

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24. We therefore answer the questions raised as follows:

(a) The insurer, as subrogee, can file a complaint under  

the Act either in the name of the assured (as his attorney  

holder)  or  in  the  joint  names  of  the  assured  and  the  

insurer for recovery of the amount due from the service  

provider. The insurer may also request the assured to sue  

the wrong doer (service provider).

(b) Even  if  the  letter  of  subrogation  executed  by  the  

assured in favour of the insurer contains in addition to  

the  words  of  subrogation,  any  words  of  assignment,  the  

complaint would be maintainable so long as the complaint is  

in  the  name  of  the  assured  and  insurer  figures  in  the  

complaint only as an attorney holder or subrogee of the  

assured.

(c) The  insurer  cannot  in  its  own  name  maintain  a  

complaint before a consumer forum under the Act, even if  

its  right  is  traced  to  the  terms  of  a  Letter  of  

subrogation-cum-assignment executed by the assured.  

(d) Oberai  is  not  good  law  insofar  as  it  construes  a  

Letter of subrogation-cum-assignment, as a pure and simple  

assignment.  But  to  the  extent  it  holds  that  an  insurer  

alone cannot file a complaint under the Act, the decision  

is correct.

25. We  may  also  notice  that  section  2(d)  of  Act  was  

amended  by  Amendment  Act  62  of  2002  with  effect  from  

15.3.2003,  by  adding  the  words  “but  does  not  include  a  

person  who  avails  of  such  services  for  any  commercial  

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purpose” in the definition of ‘consumer’. After the said  

amendment, if the service of the carrier had been availed  

for any commercial purpose, then the person availing the  

service  will  not  be  a  ‘consumer’  and  consequently,  

complaints will not be maintainable in such cases. But the  

said amendment will not apply to complaints filed before  

the amendment.

Re : Question (d)

26. Section 14(1)(d) of the Act provides that the Forum  

under the Act can direct payment of compensation awarded by  

it to the consumer for any loss or injury suffered by the  

consumer due to the negligence of the opposite party. This,  

according  to  the  appellant,  makes  it  mandatory  for  the  

complainant  to  establish  negligence  on  the  part  of  the  

opposite party, i.e. the carrier. It is further contended  

that  presumption  of  negligence  under  Section  9  of  the  

Carriers Act, 1865 (which provides that in any suit brought  

against  a  common  carrier  for  the  loss,  damage  or  non-

delivery of the goods entrusted to him for carriage, it  

shall not be necessary for the plaintiff to prove that such  

loss,  damage  or  non-delivery  of  goods  was  owing  to  the  

negligence or criminal act of the carrier, his servants and  

agents) is applicable only to a civil suit, and not to a  

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complaint  under  the  Act  which  specifically  contemplates  

establishment of negligence by evidence. It is submitted  

that in this case the compensation has been awarded even  

though  no  evidence  was  led  by  the  complainants  about  

negligence of the driver of appellant.  

27. It is no doubt true that Section 14(1)(d) of the Act  

contemplates award of compensation to the consumer for any  

loss  suffered  by  consumer  due  to  the  negligence  of  the  

opposite party (Carrier). Section 9 of Carriers Act does  

not lay down a preposition that a carrier will be liable  

even if there was no negligence on its part. On the other  

hand, it merely raises a presumption that when there is  

loss  or  damage  or  non-delivery  of  goods  entrusted  to  a  

carrier, such loss, damage or non-delivery was due to the  

negligence  of  the  carrier,  its  servant  and  agents.  Thus  

where  the  consignor  establishes  loss  or  damage  or  non-

delivery of goods, it is deemed that negligence on the part  

of  the  carrier  is  established.  The  carrier  may  avoid  

liability if it establishes that the loss, damage or non-

delivery was due to an act of God or circumstances beyond  

its control. Section 14(1)(d) of the Act does not operate  

to  relieve  the  carrier  against  the  presumption  of  

negligence created under Section 9 of the Carriers Act.  

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28. The contention of appellant that the presumption under  

section 9 of the Carriers Act is available only in suits  

filed  before  civil  courts  and  not  in  other  civil  

proceedings under other Acts, is not tenable. This Court in  

Patel Roadways Ltd. v. Birla Yamaha Ltd. [2000 (4) SCC 91]  

has observed:

“The  principle  regarding  the  liability  of  a  carrier  contained  in  S.9  of  Carriers  Act  namely, that the liability of a carrier is that  of an insurer and that in a case of loss or  damage to goods entrusted to the carrier the  plaintiff  need  not  prove  negligence,  are  applicable in a proceeding before the Consumer  Forum. The term “suit” has not been defined in  Carriers Act nor it is provided in the said Act  that the term ‘suit’ will have the same meaning  as in Civil PC. Therefore, the term ‘suit’ has  to  be  understood  in  its  ordinary  dictionary  meaning.  In  that  sense,  term  ‘suit’  is  a  generic  term  taking  within  its  sweep  all  proceedings initiated by a party for valuation  of a right vested in him under law. It is true  that  a  proceeding  before  Consumer  Forum  is  ordinarily  a  summary  proceeding  and  in  an  appropriate  case  where  the  commission  feels  that the issues raised are too contentious to  be decided in summary proceedings it may refer  parties to Civil Court. That, however, does not  mean that proceedings before the Consumer Forum  is  to  be  decided  by  ignoring  the  express  statutory  provision  of  Carriers  Act  in  a  proceeding in which a claim is made against a  common  carrier.  A  proceeding  before  the  Consumer Forum comes within the sweep of term  ‘suit.”

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29. Again in Economic Transport Organization vs. Dharward  

District  Khadi  Gramodyog  Sangh  -  2000  (5)  SCC  78,  this  

Court reiterated the  principle stated in Patel Roadways  

and added the following :  

“Even assuming that section 9 of the Carriers  Act, 1865 does not apply to the cases before  the  Consumer  Fora  under  Consumer  Protection  Act,  the  principle  of  common  law  above- mentioned  gets  attracted  to  all  these  cases  coming  up  before  the  Consumer  Fora.  Section  14(1)(d) of the Consumer Protection Act has to  be understood in that light and the burden of  proof  gets  shifted  to  the  carriers  by  the  application of the legal presumption under the  common  law.  Section  14(1)(d)  has  to  be  understood in that manner. The complainant can  discharge the initial onus, even if it is laid  on him under section 14(1)(d) of the Consumer  Protection Act, by relying on section 9 of the  Carrier  Act.  It  will,  therefore,  be  for  the  carrier to prove absence of negligence.”

We  reiterate  the  said  settled  position  and  reject  the  

contention  of  the  appellant  that  the  presumption  under  

section 9 of Carriers Act is not available in a proceeding  

under the Consumer Protection Act and that therefore, in  

the absence of proof of negligence, it is not liable to  

compensate the respondents for the loss.  

Conclusion   

30. The loss of consignment by the assured and settlement  

of  claim  by  the  insurer  by  paying  Rs.4,47,436/-  is  

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established by evidence. Having regard to the presumption  

regarding negligence under section 9 of Carriers Act, it  

was  not  necessary  for  the  complainants  to  prove  further  

that  the  loss/damage  was  due  to  the  negligence  of  the  

appellant  or  its  driver.  The  presumption  regarding  

negligence was not rebutted. Therefore, the District Forum  

was  justified  in  allowing  the  complaint  brought  by  the  

assured (first respondent) represented by the insurer and  

the insurer for recovery of Rs.447,436. The said order was  

affirmed by the State Forum and the National Forum. We find  

no  reason  to  interfere  with  the  same.  The  appeal  is,  

therefore, dismissed.  

………………………………..J [Chief Justice of India]

   …………………………………J

[R. V. Raveendran]

………………………………..J [D. K. Jain]

…………………………………J [P. Sathasivam]

………………………………..J [J. M. Panchal]

New Delhi; February 17, 2010.  

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