Punjab-Haryana High Court
United India Insurance Company Ltd vs Ranjit Singh And Another on 8 March, 2013
Author: A.N. Jindal
Bench: A.N. Jindal
Civil Revision No.5786 of 2011 (O&M) 1
IN THE HIGH COURT OF PUNJAB AND HARYANA
AT CHANDIGARH
Date of decision: 08.03.2013
1. Civil Revision No.5786 of 2011 (O&M)
United India Insurance Company Ltd.
......Petitioner
Versus
Ranjit Singh and another
.......Respondents
2. Civil Revision No.6980 of 2011 (O&M)
National Insurance Company Ltd.
......Petitioner
Versus
M/s Janta Oil Store & others
.......Respondents
3 Civil Writ Petition No.18045 of 2011 (O&M)
Ranjit Singh
......Petitioner
Versus
Permanent Lok Adalat and others
.......Respondents
Civil Revision No.5786 of 2011 (O&M) 2
CORAM : HON'BLE MR. JUSTICE A.N. JINDAL
Present: Mr. Paul S. Saini, Advocte,
for the petitioner(s) (in CR Nos.5786 and 6980 of 2011) and
for respondent Nos. 2 and 3 (in CWP No.18045 of 2011).
Mr. Rajesh Gupta, Advocate,
for respondent No.1 (in CR No.5786 of 2011) and
for the petitioner (in CWP No.18045 of 2011).
Mr. S.K. Bishnoi, Advocate,
for Mr. Manjeet Singh, Advocate,
for respondent No.2 (in CR No.6980 of 2011).
*****
A.N. Jindal, J.
This judgment shall dispose of Civil Revision Nos.5786 and 6980 of 2011 and Civil Writ Petition No.18045 of 2011, as common questions of law and facts are involved in all the cases.
The precise questions to be determined herein are as under:-
(i)Whether the suppression of facts by the assured would entail the forfeiture of the benefits which would be available to him.
(ii)Whether in the absence of forming an opinion by the Lok Adalat that the matter could be settled by way of compromise, it could proceed to decide the dispute on merits.
(iii)What is the true interpretation of the words "where the parties failed to reach the compromise, the Permanent Lok Adalat shall decide the dispute" as envisaged in Sub Section 8 of Section 22 (C) of the Legal Services Authorities Act.
Briefly stated, the facts of the case are that respondent No.1- Ranjit Singh got his Indica car bearing registration No.PB-10-BW-4700, insured from the Branch Office of the petitioner company located at G.T. Road, Near Vishwakarma Chowk, Ludhiana, vide package policy bearing Civil Revision No.5786 of 2011 (O&M) 3 No.201401/31/09/01/000002576 valid from 28.10.2009 to 27.10.2010, for a sum of Rs.2,50,000/-. At the time of obtaining the aforesaid policy, respondent No.1 availed a discount i.e. 'No Claim Bonus (NCB) @ 20%, amounting to Rs.1196.70 by making a false declaration that he did not receive any claim on the aforesaid vehicle from his previous insurer during the previous policy year. But on enquiry by the insurer from the previous insurer i.e. Oriental Insurance Company Limited, seeking confirmation regarding the status of the vehicle during previous policy period, the previous insurer of respondent No.1 vide endorsement dated 21.12.2009, confirmed that one claim was reported under the previous policy period. Thus, on receipt of the aforesaid report, the petitioner company came to know that no claim bonus was received by respondent No.1 on misrepresentation. In the meantime, the insured vehicle, owned by respondent No.1 had met with an accident, qua which he again set up a claim for Rs.99,500/-, but the company rejected the claim on the ground that respondent No.1 was guilty of suppression of material facts at the time of obtaining the insurance policy in as much as, he has suppressed the fact of having received a claim during the expiring policy period, so as to secure a false 'No Claim Bonus' from the petitioner company. Having left irritated, respondent No.1 initiated proceedings before the Permanent Lok Adalat (Public Utility Services), Ludhiana-respondent No.2, seeking a direction to the petitioner company to pay a claim of Rs.2,50,000/- on account of damage to the car along with damages of Rs.1,00,000/- and interest at the rate of 18% per annum from the date of loss till payment.
Upon notice, the petitioner-company, in its reply, disputed the claim and never agreed for compromise and had contested the petition. Since the company had vehemently contested the claim set up by respondent No.1, Civil Revision No.5786 of 2011 (O&M) 4 therefore, the Permanent Lok Adalat could not proceed further and should have referred the matter to the Civil Court for adjudication, but the Court, instead of doing so, proceeded to decide the dispute and passed the order in favour of respondent No.1 on 22.03.2011 awarding a sum of Rs.74,625/- along with interest at the rate of 9% per annum from the date of accident till realization.
Feeling aggrieved, the petitioner-company has preferred the present petition (Civil Revision No.5786 of 2011).
Ranjit Singh-respondent No.1 also filed a cross objection petition i.e. Civil Writ Petition No.18045 of 2011, for enhancement of the compensation as well as interest thereon.
Arguments heard. Record perused.
The compensation and 'No Claim Bonus', which is to be given by the Insurance Company, is public money not to be received by misrepresentation, fraud or concealment of facts. The policy is issued while reposing trust over the insurer that he would disclose true facts before the company. As such, at the time of issuing the policy, a declaration is provided under GR-27 of the All India Motor Tariff (IMT), which is a statutory regulation governing the terms and conditions of insurance policy by the insurers in India, a relevant and operative part of which is reproduced as under:-
"I/we declare that the rate of NCB claimed by me/us is correct and that no claim has arisen in the expiring policy period (copy of the policy enclosed). I/we further undertake that if this declaration is found to be incorrect, all benefits under the policy in respect of Section 1 of the Policy will stand forfeited."
Thus, on bare reading of GR-27 of the IMT, it transpires that the benefits under the policy could only be extended if the insurer had disclosed Civil Revision No.5786 of 2011 (O&M) 5 all the true facts at the time of getting the insurance policy issued in his favour. Rule GR-27 further provides that the information, so supplied, if found false at any time at a later stage, would entail forfeiture of all the benefits available under the policy. I do not find any merit in the argument that the contract of insurance was not applicable in the case of a claim, which arises out of the undertaking given by the company to indemnify the claimant for the loss suffered to the vehicle during the period of subsistence of the policy of insurance. In this regard, it may be observed that a contract of insurance is a contract uberrima fides and is based on complete good faith on the part of the insured. Thus, it is solemn obligation of the assured to disclose all true facts. In this regard, the Hon'ble Apex Court in case General ssurance Society Ltd. Vs. Chandumull Jain & another (1966) 3 SCR 500, observed as under:-
"..the duty of the Court is to interpret the words in which the contract is expressed by the parties, because it is not for the Court to make a new contract, however, reasonable, if the parties have not made it themselves."
The aforesaid judgment was followed by the Hon'ble Apex Court in a subsequent judgment rendered in case Life Insurance Corporation of India Vs. Smt. G.M. Channabasamma, AIR 1991(SC) 392, wherein it was also observed that the assured is obliged to be truthful with the company and disclose true facts.
Thus, in view of the provisions of GR-27 of IMT, which governs the grant of 'No Claim Bonus' and the consequences of claiming false 'No Claim Bonus', the claim of respondent No.1 could not be sustained. The action of respondent No.2 in granting 75% of the claim amount to respondent No.1 would amount to re-writing the policy conditions and as such, clearly Civil Revision No.5786 of 2011 (O&M) 6 violates the settled principles of law as laid down by the Hon'ble Supreme Court in the aforesaid judgment.
The present case is also squarely covered by the latest judgment of the Hon'ble Supreme Court in case M/s Suraj Mal Ram Niwas Oil Vs. United India Insurance Co., (2010) 10 SCC 567, wherein it was observed as under:-
"24. Thus, it needs little emphasis that in construing the terms of a contract of insurance, the words used therein must be given paramount importance, and it is not open for the Court to add, delete or substitute any words. It is also well settled that since upon issuance of an insurance policy, the insurer undertakes to indemnify the loss suffered by the insured on account of risks covered by the policy, its terms have to be strictly construed to determine the extent of liability of the insurer. Therefore, the endeavour of the Court should always be to interpret the words in which the contract is expressed by the parties."
Now coming to the other questions, "whether the Lok Adalat had the jurisdiction to decide the dispute on merits without forming an opinion that there was proposal for settlement and the settlement had failed" and regarding the true interpretation of the words "where the parties failed to compromise, the Court would proceed to decide the dispute." Section 22-C of the Legal Services Authorities Act, 1987 (for brevity 'the Act') requires to be reproduced as under:-
"22C. Cognizance of cases by Permanent Lok Adalat:-
(1) Any party to a dispute may, before the dispute is brought before any Court, make an application to the Permanent Lok Adalat for settlement of dispute:
Provided that the Permanent Lok Adalat shall not have jurisdiction in respect of any matter relating to an offence not compoundable under any law:
Provided further that the Permanent Lok Adalat shall also not have jurisdiction in the matter whether the value of the property in dispute exceeds ten lakh rupees:Civil Revision No.5786 of 2011 (O&M) 7
Provided also that the Central Government may, by notification increase the limit of ten lakh rupees specified in the second proviso in consultation with the Central Authority.
(2) After an application is made under sub-section (1) to the Permanent Lok Adalat, no party to that application shall invoke jurisdiction of any Court in the same dispute.
(3) Where an application is made to a Permanent Lok Adalat under sub- section (1), it-
(a) shall direct each party to the application to file before it a written statement, stating therein the facts and nature of dispute under the application, points or issues in such dispute and grounds relied in support of or in opposite to, such points or issues, as the case may be, and such party may supplement such statement, with any document and other evidence which such party deems appropriate in proof of such facts and grounds and shall send a copy of such statement together with a copy of such document and other evidence, if any, to each of the parties to the application;
(b) may require any party to the application to file additional statement before it at any stage of the conciliation proceedings;
(c ) shall communicate any document or statement received by it from any party to the application to the other party, to enable such other party to present reply thereto.
(4) When statement, additional statement and reply, if any, have been filed under sub-section (3), to the satisfaction of the Permanent Lok Adalat, it shall conduct conciliation proceedings between the arties to the application in such manner as it thinks appropriate taking into account the circumstances of the dispute.
(5) The Permanent Lok Adalat, during conduct of conciliation proceedings under sub-section (4), assist the parties in their attempt to reach an amicable settlement of the dispute in an independent and impartial manner.
(6) It shall be the duty of every party to the application to cooperate in good faith with the Permanent Lok Adalat in conciliation of the dispute relating to the application and to comply with the direction of the Permanent Lok Adalat to produce evidence and other related documents before it. (7) When a Permanent Lok Adalat, in the aforesaid conciliation proceedings, is of the opinion that there exist elements of settlement in such proceedings which may be acceptable to the parties, it may formulate the terms of a possible settlement of the dispute and give to the parties concerned for their observations and in case the parties reach at an agreement on the settlement of the dispute, they shall sign the settlement Civil Revision No.5786 of 2011 (O&M) 8 agreement and the Permanent Lok Adalat shall pass an award in terms thereof and furnish a copy of the same to each of the parties concerned. (8) When the parties fail to reach at an agreement under sub-section (7), the Permanent Lok Adalat shall, if the dispute does not relate to any offence, decide the dispute."
On perusal of the aforesaid Section, it transpires that the Lok Adalat is duty bound to formulate the possible terms of settlement, proceed ahead to settle by reconciliation and if the Court is of the view that no compromise or settlement could at all be arrived at between the parties and the dispute does not relate to any offence, the Permanent Lok Adalat loses the jurisdiction to settle dispute on merits.
In the instant case, the matter was vehemently contested; no opinion regarding the hope of compromise was formed and no terms for such settlement were framed. The petitioner-company, at the very initial stage while appearing in the Court, had outrightly condemned the conduct of respondent No.1 and pleaded his ineligibility to the compensation. As such, to decide the dispute on merits was not within the purview of the Lok Adalat.
At this stage, it would be pertinent to mention here that in the instant case, the Permanent Lok Adalat never resorted to the Provisions of sub-sections 3, 4 and 7 of Section 22C of the Act before proceeding to decide the case on merits. As a matter of fact, the Court neither complied with the aforesaid provisions nor advised the parties to seek their remedy before a Court of Law. While elaborating the scope of jurisdiction of Permanent Lok Adalat to decide such disputes, the Hon'ble Apex Court in case State of Punjab & another Vs. Jalour Singh & others, 2008 (1) Civil Court Cases 591, observed as under:-
"8. It is evident from the said provisions that Lok Adalats have no adjudicatory or judicial functions. Their functions relate purely to conciliation. A Lok Adalat determines a reference on the basis of a Civil Revision No.5786 of 2011 (O&M) 9 compromise or settlement between the parties at its instance and puts its seal of confirmation by making an award in terms of the compromise or settlement. When the Lok Adalat is not able to arrive at a settlement or compromise, no award is made and the case record is returned to the Court from which the reference was received, for disposal in accordance with law. No Lok Adalat has the power to 'hear' parties to adjudicate cases as a court does. It discusses the subject matter with the parties and persuades them to arrive at a just settlement. In their conciliatory role, the Lok Adalats are guided by principles of justice, equity, fair play. When the L.S.A. Act refers to 'determination' by the Lok Adalat and 'award' by the Lok Adalat, the said Act does not contemplate nor require an adjudicatory judicial determination, but a non-adjudicatory determination based on a compromise or settlement, arrived at by the parties, with guidance and assistance from the Lok Adalat. The 'award' of the Lok Adalat does not mean any independent verdict or opinion arrived at by any decision making process. The making of the award is merely an administrative act of incorporating the terms of settlement or compromise agreed by parties in the presence of the Lok Adalat, in the form of an executable order under the signature and seal of the Lok Adalat."
While taking the case from another angle, it transpires that the Permanent Lok Adalat instead of taking the steps for settlement between the parties, performed the role and the duty of the Consumer Redressal Commission under the Consumer Protection Act, 1986, which deals with the questions regarding "deficiency in service", "unfair trade practice" and "consumer" and the said Act also provides for compensation and other remedies. But the Legal Services Authorities Act, 1987, does not define the aforesaid terminology. As such, the dispute could not be dragged to the jurisdiction of the Lok Adalats.
Permanent Lok Adalat never assisted or guided the parties to explore possibility of amicable settlement under sub-sections (5) and (6). Neither the Permanent Lok Adalat ever opined that there was possibility of amicable settlement nor it has formulated terms of possible settlement as required under sub-section (7). Thus, without following the procedure, as Civil Revision No.5786 of 2011 (O&M) 10 laid down under sub-sections (4), (5), (6) and (7) of the Act, the Lok Adalat could not straightway invoke the provisions of sub-section (8) of the Act. As such, the order could not be sustained. Similar observations were made by this Court in case Reliance General Insurance Company Limited Vs. Vijay Kumar & another, CWP No.20825 of 2010 (decided on 04.01.2012).
It may further be noticed that the petitioner-company has specifically urged that the dispute cannot be adjudicated in a summary manner, as it requires lot of evidence and cross-examination over the witnesses with regard to the documents furnished by respondent No.1 regarding raising of 'No Claim Bonus' and the issuance of the Insurance Policy to him. The documents pertaining to the issuance of previous policy are also required to be proved, therefore, such evidence could not be led before the Permanent Lok Adalat who has to decide dispute in a summary manner.
No other point has been raised.
Resultantly, Civil Revision Nos.5786 and 6980 of 2011 are accepted and the impugned orders are set aside. However, respondent No.1- claimant is free to approach the appropriate forum for redressal of his grievance.
Consequently, Civil Writ Petition No.18045 of 2011 is dismissed.
(A.N.Jindal) 08.03.2013 Judge ajp