NON-REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.2703 OF 2010 (Arising out of SLP(C) No.11227/2009)

Amalendu Sahoo ..Appellant(s)

Versus

Oriental Insurance Co. Ltd.     ..Respondent(s)

J U D G M E N T

GANGULY, J.

1. Leave granted.

2. This  appeal  has  been  filed  challenging  the  

judgment  and  order  dated  13.10.2008  of  the  

National Consumer Disputes Redressal Commission  

(hereinafter,  ‘National  Commission’)  which  

upheld  the  concurrent  finding  of  the  District  

and State Consumer Forums that the car at the  

1

time of the accident was being driven on hire  

and  was  outside  the  scope  of  the  insurance  

policy.

3. The  appellant  who  is  the  original  complainant  

had  taken  a  comprehensive  insurance  policy  in  

respect of his private car being No. WB-34C/1919  

vide policy No.311701/3/99/7172 of 1999 and the  

complainant paid the insurance premium duly.  

4. As per the complainant, United Bank of India’s  

regional office is his tenant and many of its  

employees  are  known  to  him.   One  of  its  

employees had approached the complainant to hand  

over the aforesaid vehicle for a few hours for  

urgent use by the employees of the Bank.  The  

complainant handed the aforesaid vehicle by way  

of a good gesture and did not take any rent from  

the Bank in this regard.  The vehicle met with  

an  accident  during  the  subsistence  of  the  

policy.  

5. The complainant had lodged a claim before the  

respondent  but  it  refused  to  allow  the  claim  

2

inter alia on the ground that the vehicle was  

given on hire and as per the policy terms such  

use was not permitted and the insured was not  

entitled  to  any  compensation  for  such  

unauthorised use.

6. The  District  Forum  vide  its  order  dated  

19.06.2003  dismissed  the  claim  of  the  

complainant after going through the policy.  The  

Forum held that there is a clear condition as to  

the mode of use of the insured vehicle.  The  

policy was not applicable in case of use of the  

vehicle  for  hire,  reward  or  organized  racing  

speed  testing  and  carriage  of  goods  in  

connection  with  any  trade  or  business  by  any  

third party.  Reliance was placed on the report  

of  the  office-in-charge  of  the  police  station  

according to which the accident occurred because  

of the negligence of the driver who had a valid  

driving  licence.   Even  though  no  payment  was  

proved, the Forum held that the use of private  

car  without  payment  of  charges  could  not  be  

imagined.  It was coupled with the fact that the  

Bank  Manager  of  the  aforesaid  Bank  was  not  

3

examined as a witness by the complainant.  The  

report of the surveyor was that the vehicle was  

given on a hire basis.  However, that report was  

apparently prepared ex-parte.   

7. Aggrieved  by  the  aforesaid  order,  the  

complainant  preferred  an  appeal  to  the  State  

Consumer  Disputes  Redressal  Commission  which  

vide  its  order  dated  16.01.2004  dismissed  the  

appeal as devoid of any merits.  It was held  

that from the documents and circumstances it was  

established that the car was given on a hire.  

According  to  the  State  Commission,  the  

surveyor’s  report  was  not  challenged  by  the  

complainant.

8. Against  the  order  of  the  State  Commission,  a  

revision  was  preferred  before  the  National  

Commission and the same was dismissed vide order  

dated  13.10.2008.  According  to  the  National  

Commission there was concurrent finding on the  

fact that at the time of the accident the car  

was used for hire and it was not given as a  

4

gesture of goodwill. As such repudiation by the  

insurance company was upheld.  

9. This Court cannot, however, uphold the aforesaid  

stand taken by the insurance company, which has  

been affirmed by all the fora below.   

10. It  is  not  in  dispute  that  the  appellant  has  

taken a comprehensive insurance policy nor is it  

in dispute that the accident took place during  

the subsistence of the policy.  The policy was,  

therefore, valid on the date of the accident.   

11. What  is  disputed  by  the  insurance  company  is  

that the vehicle was not used for personal use  

but was used by way of being hired, though no  

payment for hiring charges was proved.  However,  

according to the insurance company, by using the  

vehicle on hire, the appellant had violated the  

terms of the insurance policy and on that basis  

the insurance company was within its right to  

repudiate the claim.   

5

12. Reference  in  this  case  may  be  made  to  the  

decision of National Commission rendered in the  

case of  United India Insurance Company Limited  v.  Gian  Singh reported  in  2006  CTJ  221  (CP)  (NCDRC).   In  that  decision  of  the  National  

Consumer  Disputes  Redressal  Commission  (NCDRC)  

it has been held that in a case of violation of  

condition of the policy as to the nature of use  

of the vehicle, the claim ought to be settled on  

a non-standard basis.  The said decision of the  

National Commission has been referred to by this  

Court in the case of National Insurance Company  Limited v. Nitin Khandelwal reported in 2008 (7)  SCALE 351.  In paragraph 13 of the judgment, in  

the case of Nitin Khandelwal (supra) this Court  held:-

“..The  appellant  Insurance  Company  is  liable  to  indemnify  the  owner  of  the  vehicle  when  the  insurer  has  obtained  comprehensive policy for the loss caused  to the insurer.  The respondent submitted  that  even  assuming  that  there  was  a  breach  of  condition  of  the  insurance  policy,  the  appellant  Insurance  Company  ought to have settled the claim on non- standard basis.”

6

13. In  the  case  of  Nitin  Khandelwal (supra)  the  State Commission allowed 75% of the claim of the  

claimant on non-standard basis.  The said order  

was upheld by the National Commission and this  

Court refused to interfere with the decision of  

the National Commission.   

14. In this connection reference may be made to a  

decision of National Commission in the case of  

New India Assurance Company Limited v.  Narayan  Prasad Appaprasad Pathak reported in (2006) CPJ  144 (NC). In that case also the question was,  

whether the insurance company can repudiate the  

claims  in  a  case  where  the  vehicle  carrying  

passengers and the driver did not have a proper  

driving licence and met with an accident.  While  

granting  claim  on  non-standard  basis  the  

National Commission set out in its judgment the  

guidelines issued by the insurance company about  

settling all such non-standard claims.  The said  

guidelines are set out below:-

Sr. No. Description Percentage  of settlement  

7

(i) Under declaration  of licensed  carrying capacity

Deduct 3 years’  differene in  premium from the  amount of claim  or deduct 25% of  claim amount,  whichever is  higher.

(ii) Overloading of  vehicles beyond  licensed carrying  capacity

Pay claims not  exceeding 75% of  admissible claim.

(iii) Any other breach  of warranty/  condition of  policy including  limitation as to  use

Pay upto 75% of  admissible claim.  

15. From a perusal of the aforesaid guidelines it is  

clear that one of the cases where 75% claim of  

the  admissible  claim  was  settled  was  where  

condition of policy including limitation as to  

use was breached.

16.  In the instant case the entire stand of the  

insurance company is that claimant has used the  

vehicle for hire and in the course of that there  

has  been  an  accident.  Following  the  aforesaid  

guidelines, this Court is of the opinion that  

8

the insurance company cannot repudiate the claim  

in toto.   

17. For  the  reasons  stated,  we  cannot  affirm  the  

order  of  the  fora  below.   We  direct  the  

respondent  insurance  company  to  pay  a  

consolidated  sum  of  Rs.2,50,000/-  even  though  

compensation claimed is Rs.5,00,000/-.   

18. In the facts and circumstances of this case, the  

said sum is to be paid to the appellant by the  

insurance company without any interest within a  

period of six weeks from date. However, if the  

insurance company delays the aforesaid payment  

beyond six weeks, then this amount will carry an  

interest of 9% from the date of the expiry of  

the period of six weeks till the date of actual  

payment.  

19. The  appeal  is  thus  allowed  to  the  extent  

indicated above.  

.......................J. (G.S.SINGHVI)

9

.......................J. (ASOK KUMAR GANGULY)

New Delhi March 25, 2010

10