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PETITIONER: OBERAI FORWARDING AGENCY

       Vs.

RESPONDENT: NEW INDIA ASSURANCE CO.  LTD.  & ANR.

DATE OF JUDGMENT:       01/02/2000

BENCH: S.Santosh Hedge, Syed Shah Mohammed Quadri, S.P.Bharucha

JUDGMENT:

     BHARUCHA, J.

     The  facts  are  set out only in so far  as  they  are relevant  to the two issues in this appeal, namely,  whether the first respondent insurance company was subrogated to the rights  of the second respondent consignor in respect of the lost  consignment  or  whether it was the  assignee  of  the rights of the second respondent in respect thereof;  and, if the  latter, whether it was a consumer within the  meaning of the Consumer Protection Act, 1986, entitled to maintain a complaint thereunder.

     The  second  respondent, through its agent, hired  two trucks  from  M/s.   Bhasin Goods Carriers  of  Bareilly  to transport  broken rice to Barpeta, Assam.  According to  the appellant,  it was asked by M/s.  Bhasin Goods Carriers  and the second respondents agent only to settle the freight for the  consignment, which it did.  The trucks loaded with  the consignment   did  not  reach   their  destination  and  the consignment was lost.

     The  second  respondent made a claim for the value  of the  consignment upon the first respondent, who had  insured it,  in  the sum of Rs.93,925.55.  The claim was settled  by the  first  respondent in the sum of Rs.64,137/- , and  that sum was paid to the second respondent.

     Consequent  upon  the claim being settled, the  second respondent  executed  in favour of the first  respondent,  a Letter  of  Subrogation on 15th June, 1992.  It  stated  : In consideration of your paying to us the sum of Rs.64137/- only  say Rupees Sixty four thousand one hundred and  thirty seven  only  in  full  settlement  of  our  claim  for  non- delivery/shortage  &  damage under  policy  No.2142140400015 Cert.   No./decl.  No.269240001/54 & 55 issued by you all on the  undermentioned  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.

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     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 reasonably  require  for  the purpose of carrying  out  this agreement.

     On the same day the second respondent also executed in favour  of the first respondent a Special Power of Attorney, inter alia for the following purpose :  To file suit in the court of law against the Railways Adm.  if necessary for the recovery  of  the claim moneys for the afore said claim,  on our  behalf and in our name and to give valid discharges and effectful receipt thereto.

     On  9th  September,  1992 the first  respondent  filed against  the  appellant  a   complaint  under  the  Consumer Protection  Act  in respect of the loss of  the  consignment wherein   it   stated  that   the  second   respondent   had assigned/transferred  their rights to claim the amount from the  O.P.  in favour of the complainant by executing  Letter of  Subrogation and power of attorney in it favour.   . The  complainant  stands  subrogated to the rights  of  M/s. M.S.   Industries as consumer and is consumer under the  law and  the  purview of the C.P.  Act..  The appellant in  its written  statement  contended that the first respondent  was not  a consumer and had no right to file the complaint and that  the provisions of the Consumer Protection Act were not attracted.   The  complaint was thereafter amended  and  the second respondent was added as a co-complainant.

     The  District  Forum,  Shahjahanpur,   in  which   the complaint  was filed, allowed it and directed the  appellant to  pay  to  the  respondents the sum  of  Rs.98,924.55  and interest.   The  appellant  preferred an appeal  before  the State  Forum.   The appeal was dismissed, but the amount  of compensation  was reduced to Rs.69,137/-.  Against the order of  the  State  Commission, a Revision  Petition  was  filed before  the National Consumer Dispute Redressal  Commission. The same was dismissed and the appellant was directed to pay to  the respondents the sum of Rs.98,924.55 as compensation. The  appellant  impugns the order of the  National  Consumer Disputes Redressal Commission by special leave.

     Learned  counsel for the appellant submitted that  the document   quoted   above,   though    styled   Letter   of Subrogation,  was an assignment by the second respondent of its  rights to the first respondent.  Upon such  assignment, the  assignor second respondent had no right left.  And  the assignee  first  respondent was not a consumer.   For  the first  respondent, on the other hand, it was submitted  that the  document  was indeed a letter of subrogation and  that, therefore,  the  first respondent and the second  respondent were entitled to maintain the complaint.

     Our  attention  was drawn by learned counsel  for  the appellant  to the judgments of this Court in Union of  India vs.   Sri Sarada Mills Ltd., 1972 (2) SCC 877, and New India Assurance  Co.  Ltd.  vs.  G.N.  Sainani, 1997 (6) SCC  383; the  judgments of the Madras and Andhra Pradesh High  Courts in  Vasudeva Mudaliar vs.  Caledonian Insurance Co.  & Anr., AIR  1965  Madras  159, and United India  Fire  and  General Insurance  Co.   Ltd.  vs.  Pelaniappa Transport Carriers  &

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Anr.,  AIR 1986 Andhra Pradesh 32;  and to the judgments  of the  National Consumer Disputes Refressal Commission in M/s. Green  Transport  Company vs.  New India  Assurance  Company Ltd.,  1992 (2) CPJ 349, and Transport Corporation of  India Ltd.  vs.  Davangera Cotton Mills Ltd.  & Ors., 1998 (2) CPJ 16.

     Before  we  proceed  to  consider  the  judgments  and arguments,  it  is  convenient  to   set  out  the  relevant provisions  of  the Consumer Protection Act.  Under  Section 2(b) a consumer can be a complainant.  A consumer, under the  terms of Section 2(d)(ii), is, inter alia:  any person who  hires  or  avails of any services for  a  consideration which  has  been paid or promised or partly paid and  partly promised,  or  under  any  system of  deferred  payment  and includes  any  beneficiary of such services other  than  the person  who hires or avails of the service 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;

     Section 3 states:

     The  provisions of the Consumer Protection Act are in addition  to and not in the derogation of the provisions  of any other law for the time being in force.

     In  the  case  of Vasudeva Mudaliar (ibid)  a  learned Single  Judge  of  the  Madras High Court  said  :   (4)  A contract  of  motor  insurance,   like  marine  or  accident insurance,   is,   in  essence,   one  of  indemnity.    The underwriter,  for  consideration,   guarantees  the  assured compensation  against  loss  or  risks, the  limits  of  the guarantee  against  accident  or loss  or  damage  suffered, totally   or  partially,  being   subject  to  the   maximum stipulated  in  the contract of insurance.  Conversely,  the rights  of the assured are not to profit out of the bargain. It  is  implied  in  the  very nature  of  the  contract  of indemnity  that  the indemnifier is entitled to re-coupe  or minimise  the  damages he is obliged to pay the assured,  by ways and means the assured himself could resort to, in order to  reimburse  himself against loss caused to him  by  third party  negligence.   Such  a  right of the  insurer  is,  of course,  conditional upon his having already indemnified the assured.   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.   This 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.  This is as a matter  of  law relating to indemnity, and the basis of  the right  is  justice, equity and good conscience, namely,  the indemnifier  should be in a position to reduce the extent of his liability within limits.

     (5)  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 assured in respect  of third  parties  and  his  claims  against  them  founded  on tortious  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 does not ipso jure

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enable  him  to sue third parties in his own name.  It  will only  entitle the insurer to sue in the name of 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 an 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  assureds 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.  .

     This  Court  in  the case of Union of India  vs.   Sri Sarada  Mills  Ltd.   (ibid) was hearing an  appeal  by  the Railways in a suit for damages for bales of cotton which had been  damaged in transit.  All the three learned Judges  who heard  it  were agreed that subrogation did not  confer  any independent  right on underwriters to maintain in their  own name  and without reference to the persons assured an action for  damage  to the things insured.  The majority  took  the view  that in the case before them the insurance company and the  consignor  mill  had proceeded on the  basis  that  the former  was only subrogated to the rights of the latter  and the  insurance  company had allowed the respondent  mill  to sue;   the cause of action of the mill against the  Railways did not perish on giving the letter of subrogation.  Mathew, J.,  dissenting,  referred to the finding of the High  Court that  there had been an assignment of a mere right to sue by the respondent mill to the insurance company and, therefore, in  his view, the question was whether what was assigned was a  mere right to sue or something which the law of insurance recognised  as  assignable.  The reason why a mere right  to sue  could  not  be  assigned was that  such  an  assignment offended the rule of champerty and maintenance.  The learned Judge  concluded  that  the assignment had conveyed  to  the insurance company the entire right in respect of the subject matter  of the insurance, including the right of the insured to  sue in its own name, and that, after the assignment, the respondent mill had no cause of action to institute the suit against the Railways for the recovery of damages.

     The  case  of United India Fire and General  Insurance Co.   Ltd.  (ibid) related to a document in its favour which recited  that it had paid to the consignor compensation  for the  loss  of the consigned goods and the consignor  hereby assigned  and  transferred to you all our rights  title  and interest  in  respect of the said goods and all  rights  and claims  against  any person or persons in respect  thereof. The  Andhra  Pradesh  High  Court held  that  the  appellant insurance  company  had been assigned the right,  title  and interest of the consignor and the suit by it for recovery of damages  was  maintainable,  though the  consignor  was  not impleaded as a co-plaintiff.

     In  New India Assurance Co.  Ltd.  vs.  G.N.   Sainani (ibid)  this  Court was examining a complaint filed  by  the appellant  insurance  company under the Consumer  Protection Act.  The question that arose was whether the assignee could be  said  to be a beneficiary so as to be able to  make  the complaint.   What  had  been assigned was found  to  be  the

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amount  of  the  loss that was suffered by  the  assured  on account  of  short landing of the concerned  goods,  meaning thereby that what had been assigned was the right to recover the  loss.   It was merely the assignment of a right to  sue for  the  loss  on  account  of  short  landing.   It   was, therefore,  difficult  to see how it could be said that  the assignee  was  the  beneficiary of any service.   While  the assignee  might have the right to recover the loss from  the insurer  by  filing  a suit in a civil court, he  could  not avail  of  the  remedy  under the  Consumer  Protection  Act because he was not a consumer.

     The  Consumer  Protection  Forum in the case  of  M/s. Green  Transport  Company (ibid) analysed the definition  of consumer  under the Consumer Protection Act and found that it  was  only  the  person  who  had  hired  a  service  for consideration or any other person availing of the benefit of such  service  with his approval who could be regarded as  a consumer   thereunder.   In  the   case  before  it,   the respondent  insurance  company was the complainant.  It  had insured a consignment which had been lost.  The fact that it had  acquired rights of subrogation against the  transporter did not improve its position so far as proceedings under the Consumer  Protection  Act  were   concerned.   Neither   the subrogation  nor the deed of transfer of the right of action nor  the Special Power of Attorney clothed it with the legal status  of  a consumer so as to entitle it to  invoke  the special jurisdiction of and maintain the complaint under the Consumer  Protection  Act.  In the Transport Corporation  of India  Ltd.   case (ibid) the insurance company was not  the sole  complainant.   The consignor and the consignee of  the lost consignment were parties to the complaint.  It was held that  the  transporter was liable to indemnify them for  the loss  of  goods.  Though the claim had been settled  by  the insurance  company and the consignor had issued a letter  of subrogation, that did not effect the rights of the consignor and  consignee  to  claim the value of the  goods  from  the transporter.  Accordingly, the complaint was maintainable.

     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.

     The  distinction between subrogation and assignment is explained  in  the standard text book on Insurance Law  by MacGillivray & Parkington (Seventh Edition).

     1131.  Difference between subrogation and assignment. 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, an 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

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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 assureds 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  assureds  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.

     1132.   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 assureds rights under statute should proceed in his own name ..

     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 in  consequence of or arising from the said loss or damage.

     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, first, the word assigned  would not be used.  Secondly, there would not be a transfer of all the  second  respondents 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.

     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.

     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  respondents  rights  but was merely  subrogated  to

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them.   The  terms of the Letter of Subrogation  are  clear. They  cannot  be read differently in the light  of  another, though contemporaneous, document.

     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.  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.

     By  reason  of the transfer and assignment of all  the rights  of  the second respondent in the first  respondents 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.

     In  the premises, the appeal is allowed.  The judgment and order under appeal is set aside.  The complaint filed by the respondents is dismissed.