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PETITIONER: B.V. NAGARAJU

       Vs.

RESPONDENT: M/S. ORIENTAL INSURANCE CO. LTD.DIVISIONAL OFFICE, HASSAN

DATE OF JUDGMENT:       20/05/1996

BENCH: PUNCHHI, M.M. BENCH: PUNCHHI, M.M. PARIPOORNAN, K.S.(J)

CITATION:  1996 SCC  (5)  71        JT 1996 (5)   285  1996 SCALE  (4)608

ACT:

HEADNOTE:

JUDGMENT:                       J U D G M E N T Punchhi, J.      In this  appeal  by  special  leave,  the  question  of importance arising  therein is whether the alleged breach of carrying humans  in a  goods’ vehicle  more than  the number permitted  in   terms  of   the  insurance   policy,  is  so fundamental a  breach so  as to afford ground to the insurer to eschew liability altogether? Ancillary to the question is the poser  : whether  the terms  of the  policy of insurance need be  construed strictly  or be  read down to advance the main purpose  of the  contract as  viewed by  this Court  in Skandia Insurance Co. Ltd. vs. Kokilaben Chandravadan & Ors. [1987 2 SCC 654]?      The appellant  herein was  the registered  owner  of  a ’Tata’ Truck  bearing No.  KA-13/438, duly  insrued with the Oriental Insurance  Co. Ltd.  the  respondent  herein,  vide Policy dated  24.8.1990 covered  for period uptil 23.8.1991. The policy was comprehensive in nature, covering risk to the limit of  Rs. 2,09,000/-.  During  the  subsistence  of  the policy, the vehicle of the appellant met with an accident on 5.8.1991 when,  allegedly, a  gas  tanker  came  and  dashed against the  said vehicle.  Apart from he other damage which occasioned due  to the  accident,  the  appellant’s  vehicle sustained major  damages on  account of  which repairs  were necessitated. The  appellant, therefore,  incurred from  his necessitated. The  appellant, therefore,  incurred form  his pocket repair charges/damages to the tune of Rs. 87,170/- in order to  make the  vehicle road-worthy.  Pursuant  to  such expenditure,  the   appellant  raised   a  claim   with  the respondent-Company  inter-alia   for  reimbursement  of  the repair charges/damages  submitting therewith  the claim-form and the  bills for  payment. The  claim of the appellant was spurned. The  appellant sent a legal notice calling upon the respondent-Company to  make payment  to the claim as per the contractual conditions  of  the  policy  but  in  vain.  The

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appellant then  moved the Karnataka State Consumer Redressal Forum under  the Consumer  Protection Act,  1986  raising  a demand of  Rs. 2,13,500/-,  diversifying the claim as repair charges, loss  of prospective income, interest, legal notice charges and other miscellaneous expenses.      The   respondent-Company    denied   their    liability altogether stating  that since the appellant’s goods vehicle was used  for the  purpose of  the carrying  passengers, the appellant was  disentitled to  claim any  compensation,  and even otherwise  those were  nine in  numbers. The  amount of money spent  by the  appellant on  repairs however  was  not seriously disputed  as the  respondent’s  Official  Surveyor himself and estimated the repair possibility at Rs.75,700/-.      The State  Commission went  into the  matter thoroughly and by  its order  dated 19.7.1993  allowed the claim of the appellant to the extent of Rs. 75,700/-, figure at which the Official Surveyor  of the  respondent Company  and estimated the repair  charges, along  with the interest at the rate of 18% per annum from the date of the accident i.e. 5.8.91 till the date  of payment.  A sum of Rs. 2,000/- also was awarded to the  appellant as  costs. This  order, at the instance of the respondent  as costs. This order, at the instance of the respondent Company,  was,  however,  upset  on  ap  peal  on 30.11.1994  by  the  National  Consumer  Disputes  Redressal Commission,  New  Delhi,  relying  upon  the  terms  of  the insurance policy  in taking the view that the policy did not cover use  for carrying  passengers in  the  vehicle  except employees  [other  than  the  Driver]  not  exceeding  6  in numbers,  coming   under  the   purview  of   the  Workmen’s Compensation Act, This has culminated into this appeal.      The terms  of the Insurance Policy, inter alia, provide as follows :      "Limitations as  to use:  Only  for      the carriage  of goods  within  the      meaning of  the Motor Vehicles Act,      1988.      The policy  does not cover - 1) Use      for organized  racing,  pace-making      reliability trial or speed testing.      2) Use  whilst  drawing  a  trailer      except towing  of any  one disabled      mechanically propelled  vehicle. 3)      Use for  carrying passengers in the      vehicle  except   employees  [other      than driver]  not exceeding  six in      numbers coming under the purview of      W.C. Act, 1923."      Learned counsel  for the  appellant, in support of this appeal, strongly  relied on Skandia’s case [supra], making a servant appeal  that the  terms of the policy afore referred to, should  be read  down to  carry out the main purposes of the policy  as the  presence of  9 persons [when upto 6 were permissible], irrespective  of their being employees or not, had not  contributed   in any manner to the occurring of the accident as  also went  he  claim  did  not  relate  to  any injuries to  those 9  persons (who  were owners of the goods loaded) or  any loss  incurred by them; the claim pristinely relating to  the damage caused to the vehicle insured, which could  not   have  been   denied  in   the  facts   and  the circumstances. Strong  reliance, in support, was sought from the reasoning of the State Commissioner which had in so many words said: "....Even  for   the  sake   of  argument,  that  9  persons travelling in  the vehicle  were passengers,  it cannot be a ground for  Insurance Company  to repudiate  the contract as

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the fact  of their being passengers or collies does not make any difference  to the  risk involved. These persons were in no way  concerned with  the cause  of the  accident not have they contributed  to the  risk in respect of the loss caused to  the   vehicle.  The  complainant  has  not  claimed  any compensation in  respect of  his liability  to  the  persons travelling in the vehicle."      It is plain from the terms of the Insurance Policy that the  insured  vehicle  was  entitled  to  carry  6  workmen, excluding the  driver. If those 6 workmen when travelling in the vehicle, are assumed not to have increased any risk from the point  of view  of the Insurance Company on occurring of an accident,  how could  those added persons be said to have contribued to  the causing of it is the poser, keeping apart the load  it was not carrying. Here it is nobody’s case that the driver  of the  insured vehicle  was responsible for the accident. In  fact, it  was not  disputed that  the oncoming vehicle had  collided head-on  against the  insured vehicle, which resulted in the damage. Merely by lifting a persons or two, or  even three,  by the  driver or  the cleaner  of the vehicle, without  the knowledge  of owner, cannot be said to be such  a fundamental  breach that the owner should, in all events, be denied indemnification. The misuse of the vehicle was somewhat  irregular though,  but not  so fundamental  in nature so  as to  put an  end to  the contract,  unless some factors existed which, by themselves, had gone to contribute to the  causing  of  the  accident.  In  the  instant  case, however, we  find no  such contributory  factor. In Sikand’s case this  Court paved  the way  towards  reading  down  the contractual Clause by observing as follows :      ".......When the  option is between      opting  for   a  view   which  will      relieve the  distress and misery of      the victims  of accidents  or their      dependants on  the one hand and the      equally plausible  view which  will      reduce  the  profitability  of  the      insurer   in    regard    to    the      occupational hazard  undertaken  by      him by  way of  business  activity,      there is  hardly  any  choice.  The      Court cannot but opt for the former      view. Even  if one  were to  make a      strictly doctrinaire  approach, the      very same  conclusion would  emerge      in obeisance  to  the  doctrine  of      ’reading down’ the exclusion clause      in the  light of the ’main purpose’      of  the   provision  so   that  the      ’exclusion   clause’    highlighted      earlier.  The  effort  must  be  to      harmonize  the   two   instead   of      allowing the  exclusion  clause  to      snipe  successfully   at  the  main      purpose. The  theory which needs no      support is  supported  by  Carter’s      "Breach of Contract" vide paragraph      251. To quote :           Notwithstanding  the   general      ability of  contracting parties  to      agree to  exclusion  clauses  which      operate to define obligations there      exists a  rule, usually referred to      as the  "main purpose  rule", which      may limit  the application  of wise

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    exclusion   clauses    defining   a      promisor’s contractual obligations.      For example, in Glynnn v. Margetson      & Co.  [1893  AC  351,  357],  Lord      Halsbury, L.C. stated : It seems to      me   that    in   construing   this      document, which  is a  contract  of      carriage between  the parties,  one      must in  the first instance look at      the whole instrument and not at one      part of  it only.  Looking  at  the      whole instrument,  and seeing  what      one must  regard ...... as its main      purpose,  one  must  reject  words,      indeed whole  provisions,  if  they      are  inconsistent   with  what  one      assumes to  be the  main purpose of      the contract.           Although this  rule  played  a      role  in  the  development  of  the      doctrine of fundamental breach, the      continued validity  of the rule was      acknowledged when  the doctrine was      rejected by  the House  of Lords in      Suissee    Atlantique     Societed’      Armement  Maritime   S.A.  v.  N.V.      Rotterdamsche Kolen  Centrale [1967      1  AC   361].   Accordingly,   wide      exclusion clauses will be read down      to the  extent to  which  they  are      inconsistent with the main purpose,      or object of the contract."      The   National   Commission   went   for   the   strict construction of the exclusion clause. The reasoning that the extra passengers  being carried  in the  goods vehicle could not have contributed, in any manner, to the occurring of the accident, was barely noticed and rejected sans any plausible account; even  when the  claim confining  the damage  to the vehicle only  was limited  in nature.  We, thus,  are of the view that  in accord  with the Skandia’s case, the aforesaid exclusion term  of the insurance policy must be read down so as to serve the main purpose of the policy that is indemnify the damage caused to the vehicle, which we hereby do.      For the  view above  taken, this appeal is allowed, the judgment  and   order  of  the  National  Consumer  Disputes Redressal Commission, New Delhi is set aside and that of the State Commission  is restored  in its  entirety, but without any order as to costs.