Delhi District Court
M/S Pawan Finvest Pvt. Ltd vs M/S National Insurance Co. Ltd on 6 January, 2012
IN THE COURT OF DR. ARCHANA SINHA
ADDL. DISTRICT & SESSIONS JUDGE, (CENTRAL) 04, THC, DELHI
Date of institution : 11.01.2007
Judgment reserved on : 02.01.2012
Judgment delivered on : 06.01.2012
CS No. 116/11/07 Unique Case ID No. 02401C0024832007
M/s Pawan Finvest Pvt. Ltd.
5/5761, Gali No.2, Dev Nagar,
Karol Bagh, New Delhi110005.
Through its Manager,
Sh. Krishan Pal
Son of Sh. Roshan Lal ....Plaintiff
VERSUS
1. M/S National Insurance Co. Ltd.
Branch Office Mohan Tower,
1st Floor, Wazirpur Commercial Area,
Ring Road, Delhi110052.
2. Sh. Rajesh Kumar
S/o Sh. Jagmal Singh,
R/o House No.221, Village Samaipur,
Delhi - 110 042 ...... Defendants.
J U D G M E N T
1. The plaintiff M/s Pawan Finvest Pvt. Ltd. has filed the suit for recovery for a sum of Rs.3,79,430/ against the two defendants viz. M/s CS NO. 116/11/07 M/s Pawan Finvest Vs. National Insurance Co. Ltd.. Page No. 1 National Insurance Co. Ltd., defendant No.1 and Mr. Pawan Kumar, the Principal Borrower, the defendant No.2.
2. In brief, the facts as set out in the plaint are that the defendant No.2 has entered into a Hire Purchase Agreement dated 09.03.2002 (herein after called 'HPA'), with regard to the vehicle bearing No. HR46 A2094 make Tata 407 for the total sum of Rs. 1,50,000/ on the terms that a total sum of Rs.1,98,000/ in lump sum shall be paid in 22 EMIs of Rs.8,600/ plus 23rd EMI of Rs.8,800/ w.e.f. 09.03.2002.
It was averred that the defendant No. 2 had defaulted in making the payments after payment of six EMIs up to October 2002, and on pursuation, had issued a cheque dated 02.01.2003 for an amount of Rs.1,38,640/ towards due EMIs and overdue charges, but on presentation, it was dishonoured, and a criminal complaint under Section 138 N.I. Act was filed before the Court at Rohini, which was still pending.
3. Further, the vehicle was insured with defendant No.1 for the period 11.10.2002 to 10.10.2003 and was hypothecated in the name of the plaintiff as per the Registration Certificate, but on 18.11.2002 it was stolen, and an FIR No.207 dated 20.11.2002 was lodged under Section CS NO. 116/11/07 M/s Pawan Finvest Vs. National Insurance Co. Ltd.. Page No. 2 379 IPC with P.S. Kapashera, New Delhi. An insurance claim was filed by defendant No.2 with respect to the vehicle in question, which was still pending with defendant No.1.
It was further pleaded that the plaintiff was entitled to recover the sum assured to the tune of Rs.1,80,000/ against the vehicle, and was also entitled for an interest @ 3% per annum as per the HPA entered with defendant No.2 from the defendant No.1, and the amount so calculated comes to Rs.3,79,430/ which is the suit amount.
Thus the suit was filed seeking a money decree for the sum of Rs.3,79,430/ along with an interest @ 24% from the date of filing of the suit till its realization, against the defendants.
4. The defendant No.1 through its contra pleadings had taken preliminary objections of no cause of action, no locus standi of the plaintiff, and also no privity of contract between the plaintiff and the defendant No.1 to claim such recovery, also that the suit was bad for mis joinder of parties as the defendant No.1 was not a necessary party.
5. The defendant No.2 through contra pleadings had taken a preliminary objections of the suit beyond limitation, no cause of action and no privity of contract to claim the recovery for the sum insured. CS NO. 116/11/07 M/s Pawan Finvest Vs. National Insurance Co. Ltd.. Page No. 3
Also on merits it was pleaded that there was an agreement on 30.12.2002 of defendant No.2 with the plaintiff vide which the defendant agreed to pay the remaining loan amount within a year and despite such agreement the defendant was kept in dark and the plaintiff filed a criminal complaint under Section 138 of Negotiable Instruments Act, after filling one of the signed blank cheques, which was taken as security towards repayment of the loan at the time of HPA.
Also that the plaintiff was in collusion with defendant No.1 who got issued the letter dated 02.09.2005 in order to get the RC transferred in the name of defendant No.1 and simultaneously assuring the plaintiff to release the payment in its favour.
It is submitted that the plaintiff has no claim against the answering defendant after giving no objection certificate for deletion of hypothecation endorsement, which led to termination of hirepurchase agreement and other relevant documents since September 2005.
Thus, it was pleaded that the suit against the answering defendant be dismissed.
6. The replications to the written statements of both the defendants were filed by the plaintiff reiterating the facts as stated in the plaint and denied the averments of the defendants.
CS NO. 116/11/07 M/s Pawan Finvest Vs. National Insurance Co. Ltd.. Page No. 4
7. On the basis of the pleadings vide order dated 02.09.2008, the following issues were framed :
1. Whether the plaintiff is entitled to recover the suit amount?
If so, to what extent and from which defendant?OPP.
2. Whether the suit of the plaintiff is within limitation?
3. Relief.
8. For proving the case, the plaintiff has examined Sh. Krishan Pal, its Manager as PW1. Who produced his evidence by way of an affidavit Ex.PW1/A and exhibited the following documents Ex.PW1/1 to 9.
● The document Ex.PW1/1 is the copy of Resolution dated 15.11.2006 (OSR).
● The document Ex.PW1/2 is the copy of certificate of incorporation (OSR).
● The document Ex.PW1/3 is the original Hire Purchase Agreement.
● The document Ex.PW1/4 is the original Insurance Policy.
● The document Ex.PW1/5 is the carbon copy of FIR. ● The document Ex.PW1/6 is the Letter dated 16.03.2004.
CS NO. 116/11/07 M/s Pawan Finvest Vs. National Insurance Co. Ltd.. Page No. 5 ● The document Ex.PW1/7 is the letter dated 02.09.2005. ● The document Ex.PW1/8 is the carbon copy of letter received by the plaintiff on 10.11.2005.
● The document Ex.PW1/9 is the letter dated 15.09.2005. ● The documents Mark A is the letter dated 30.12.2002, Mark B is the Motor Claim Form, Mark C is the photocopy of R/C and Mark D is the receipt dated 09.03.2002.
This witness has been crossexamined at length by ld. Counsels for both the defendants.
9. To counter the plaintiff's case, the defendant has examined Sh.V.K. Bhandari, Deputy Manager of defendant No.1 as DW1 who exhibited his affidavitinevidence as Ex.DW1/X and proved following documents:
● Ex.DW1/A is the carbon copy of letter dated 27.06.2005.
●The document Ex.DW1/B is the reminder dated 05.11.2005.
●The document Ex.DW1/C is the carbon copy of letter dated 30.01.2006.
●The document Ex.DW1/D is the true copy of Insurance Policy running into three pages.
CS NO. 116/11/07 M/s Pawan Finvest Vs. National Insurance Co. Ltd.. Page No. 6
10. I have heard Ld. Counsel B.S. Rana for the plaintiff and Ld. Counsel Sh.V.K. Gupta for defendant No.1 and Ld. Counsel Sh. Rohtash Kumar for defendant No.2 on all the issues and have gone through the records placed with the file.
11. Now, my issue wise findings and observations are as under :
12. Issue No.2 is taken up first as it relates to the legal issue based on the law of limitation.
Issue No.2 Whether the suit of the plaintiff is within limitation? The onus to prove this issue is laid on the defendant No.2 as is based on the preliminary objection raised by him in his written statement.
13. In support of this issue no evidence has been led by the parties and during the course of arguments, it is submitted by ld. Counsel Sh.Rohtash Kanwar on behalf of defendant No.2 that the last payment was made to the plaintiff in the month of October, 2002 and even the HPA was to be concluded on 10.02.2004 and filing of suit in the year 2007 was CS NO. 116/11/07 M/s Pawan Finvest Vs. National Insurance Co. Ltd.. Page No. 7 beyond the stipulated period of three years, as it relates to the subject matter of recovery of the payment related to the HPA of the vehicle executed between the plaintiff and defendant No.2.
14. To counter such submissions ld. Counsel Sh. B.S. Rana for the plaintiff has submitted that the cause of action in the suit was relating to the recovery of the claim of the sum insured for the vehicle financed by it to the answering defendant under HPA and was still persisting and continued even at the time of filing of the suit as the insurance claim was not settled by defendant No.1 even up to the time of filing of such suit, thus, it is submitted that the filing of the suit in 2007 was not beyond the period of limitation.
15. On careful perusal of the records consisting of the pleadings and the evidence of the parties, it is observed that the plaintiff has filed a suit for recovery for the sum of Rs.3,79,430/, and basically it is claimed in the suit that the plaintiff was entitled to recover the sum assured along with an interest from defendant No.1, the insurance company.
It is a matter of record and not in dispute that the insurance claim was not settled by defendant No.1 up to 2008, on the ground that the required formalities were not completed to settle the claim by that CS NO. 116/11/07 M/s Pawan Finvest Vs. National Insurance Co. Ltd.. Page No. 8 time, that makes it clear that the cause of action had first arisen on the date when the EMI for the month of October, 2002 was paid as last payment by defendant No.2 to the plaintiff, and also on the date when the vehicle was stolen in the month of November, 2002, and even on the date when the insurance claim was filed with defendant No.1 for the theft of the hypothecated vehicle financed by the plaintiff. In this case as the insurance claim was not settled up to 2008, the cause of action was a perpetual one up to the finalization of such claim, as the subject matter of the suit was the recovery of the 'sum assured' against the vehicle.
Therefore, on the basis of above matrix of the facts established on record in the settled proposition of law of limitation, the filing of the suit in the year 2007 was well within the period of limitation.
Therefore, the issue No.2 is decided in favour of the plaintiff and against the defendant No.2.
16. Issue No.1 Whether the plaintiff is entitled to recover the suit amount? If so, to what extent and from which defendant?OPP. Onus of proving this issue was laid on the plaintiff as his claim for recovery of Rs.3,79,430/ depends on the plea that he had financed the vehicle under HPA and the vehicle being insured by the Hirer, the CS NO. 116/11/07 M/s Pawan Finvest Vs. National Insurance Co. Ltd.. Page No. 9 defendant No.2 with defendant No.1, under the Contract of Insurance as per the terms of the HPA, & the plaintiff was claiming his entitlement for the sum assured in the event of the vehicle was stolen during the subsistence of the HPA.
17. To discharge the burden in establishing the claim raised in the suit, the plaintiff has produced the evidence of one Sh. Krishan Pal, its Manager as PW1. Who produced his evidence by way of an affidavit Ex.PW1/A and exhibited the documents Ex.PW1/1 to 9. This witness has been crossexamined at length by ld. Counsels for defendants.
18. It is observed that it is not in dispute that the defendant No.2 has entered into the HPA Ex.PW1/3 with the plaintiff for the finance of the vehicle in question. Also it is an admitted fact that the insurance agreement was executed between the defendant No.1, the insurer and the defendant No.2, the insured under which the original insurance policy Ex.PW1/4 carrying the name of the plaintiff as the financier to whom the vehicle was hypothecated.
The factum of payment of the installments up to October, 2002 as per the terms of HPA, the theft of the vehicle in question in November, 2002, registration of the FIR, copy of which is Ex.PW1/6 for theft of the CS NO. 116/11/07 M/s Pawan Finvest Vs. National Insurance Co. Ltd.. Page No. 10 vehicle, and the request letter dated 30.12.2002 Mark A, for claim of the sum assured to the tune of Rs.1,80,000/ filed by defendant No.2 with the insurance company i.e. defendant No.1, are also admitted on record.
Thus it is established on record that the plaintiff and the defendant No.2 entered into an HPA dated 09.03.2002, vide which one commercial vehicle make Tata 407, bearing Registration No. HR46A2094 was financed on the terms of repayment of an amount of Rs.1,98,000/ in 23 installments starting from 9.03.2002 to 10.02.2004.
19. It is also established that the installments only up to October, 2002 were paid by defendant No.2 to the plaintiff, and the vehicle in question was stolen in the month of November, 2002 for which an FIR was registered for theft, and the request for claiming the sum assured was moved by defendant No.2 to the insurance company i.e. defendant No.1.
20. It is duly proved on record that the insurance claim was not settled up to 2008, that is prior to the filing of the suit for such claim and the plaintiff is claiming the sum assured along with an interest from defendant No.1 on the ground that the vehicle was hypothecated to them, being the financier, thus they were the owner on the date of the theft of CS NO. 116/11/07 M/s Pawan Finvest Vs. National Insurance Co. Ltd.. Page No. 11 the said vehicle which was insured with defendant No.1, and that the insurance policy had the cover of risk of theft with respect to the vehicle.
21. For claiming the sum assured from defendant No.1, the plaintiff is relying on the terms of HPA Ex.PW1/3, the insurance policy Ex.PW1/4 and the information letter regarding the theft of the vehicle dated 30.12.2002 Mark A, the copy of letter dated 16.03.2004 Ex.PW1/6, the letter dated 02.09.2005 Ex.PW1/7 and the communication received on 10.11.2005 Ex.PW18, also on the letter dated 15.09.2005 Ex.PW1/9 written to the registering authority about change of ownership of the vehicle.
22. It is submitted by ld. Counsel Sh. B.S. Rana on behalf of the plaintiff that the total hired amount financed was not recovered from defendant No.2 and the occasion of the purchase of such vehicle, by the defendant No.2 on termination of the HPA, could not come as during the period of hypothecation of the vehicle, the vehicle was stolen and being the owner of the vehicle at the time of theft as per the terms of HPA, the plaintiff is entitled for receiving the amount to be received from the insurance company, against the insurance claim pertaining to the vehicle. CS NO. 116/11/07 M/s Pawan Finvest Vs. National Insurance Co. Ltd.. Page No. 12
23. Ld. counsel Sh. V.K. Gupta for defendant No.1 has raised the contentions that the plaintiff had no locusstandi to file the claim or to receive the sum assured from it as there was no agreement between the plaintiff and defendant No.1, as the Contract of Insurance was executed with the defendant No.2 the insured, and not by the plaintiff with defendant No.1, the insurer.
24. However, during the course of arguments, ld. Counsel Sh. V.K. Gupta has given a statement that on compliance of all the formalities with respect to the claim for theft of the vehicle in question, as the vehicle is transferred in the name of the defendant No.1, the insurer by the defendant No.2, the insured, the claim has been settled finally in 2008 for the amount of Rs.1,79,500/ that is calculated as the sum assured of Rs. 1,80,000 - Rs.500 that was to be deducted towards compulsory excess clause, as per the Contract of Insurance.
25. It was fairly conceded by the ld. Counsel appearing on behalf of defendant No.1, that the defendant No.1 has no objection in making of the payment of the settled claim of Rs.1,79,500/ either to the plaintiff or CS NO. 116/11/07 M/s Pawan Finvest Vs. National Insurance Co. Ltd.. Page No. 13 to the defendant No.2, who has transferred the vehicle in the name of defendant No.1, in the year 2008.
26. It is argued on behalf of plaintiff that the plaintiff was not a party to the Contract of Insurance but the cover of insurance policy maintained the hypothecation endorsement in the name of the plaintiff, who was a financier of such vehicle and was the owner of the vehicle as per the terms of HPA as the vehicle was never purchased by defendant No.2 on the termination of the terms of HPA that occasion could never come, being the vehicle was stolen during the period of subsistence of the HPA and even the remaining installments were not paid by the defendant No.2 after October, 2002.
27. Ld. counsel has placed its reliance for the claim of sum assured on the basis of terms of Contract of Insurance executed by defendant No.1 with the defendant No.2. Such term in the contract was relating to the liability against the fire and/or theft under HPA The terms No. IMT 3 (A) and 10 of the Contract of Insurance framed by National Insurance Company Ltd. (defendant No.1) are reproduced as below: CS NO. 116/11/07 M/s Pawan Finvest Vs. National Insurance Co. Ltd.. Page No. 14 IMT 3 (A)LIABILITY AGAINST FIRE AND/OR THEFT It is hereby understood and agreed that notwithstanding anything to the contrary contained in Section I of this Policy the Company shall not be liable thereunder except in respect of loss or damage by fire external explosion, selfignition or lightning or burglary housebreaking or theft.
Subject otherwise to the terms, exceptions, conditions and limitations of the Policy.
Notes:
(1) In the case of liability and Fire only, delete the words "or burglary housebreaking or theft" from the first paragraph.
(2) In the case of liability and Theft only, delete the words "fire external explosion, selfignition or lightning or from the first paragraph.
IMT.10. HIRE PURCHASE AGREEMENT:
It is hereby understood and agreed that the Financiers as mentioned in the Schedule (hereinafter referred to as the Owners) are the owners of the Commercial vehicle and that the Commercial vehicle is the subject of the Hire Purchase Agreement made between the Owners of the one part and the Insured on the other part and it is further understood and agreed that the Owners are interested in any monies which but CS NO. 116/11/07 M/s Pawan Finvest Vs. National Insurance Co. Ltd.. Page No. 15 for this Endorsement would be payable to the Insured under this Policy in respect of such loss or damage to the commercial vehicle (which loss or damage is not made good by repair reinstatement or replacement) and such monies shall be paid to the Owners as long as they are the Owners of the Commercial vehicle insured and their receipt shall be a full and final discharge to the Company in respect of such loss or damage.
Save as by this Endorsement expressly agreed nothing herein shall modify or affect the rights and liabilities of the Insured or the Company respectively under or in connection with this Policy.
Subject otherwise to the terms exceptions conditions and limitation of this policy.
28. An analogous similar provisions, IMT.5 Hire Purchase Agreement, enshrined in Contract of Insurance by another insurance company i.e. Royal Sunderam Alliance Insurance Company ltd. is also produced to show the General Policy of insurance companies for protecting the financier's interest.
IMT.5. HIRE PURCHASE AGREEMENT reads as under: It is hereby understood and agreed that the financier as specified in the Schedule (hereinafter CS NO. 116/11/07 M/s Pawan Finvest Vs. National Insurance Co. Ltd.. Page No. 16 referred to as the Owners) are the Owners of the vehicle insured and that the vehicle insured is subject of an Hire Purchase Agreement made between the Owners on the part and the Insured on the other part and it is further understood and agreed that the Onwers are interested in any monies which but for this Endorsement would be payable to the Insured under this Policy in respect of such loss or damage to the vehicle insured as cannot be made good by repair and/or replacement of parts and such monies shall be paid to the Owners as long as they are the Owners of the vehicle insured and their receipt shall be a full and final discharge to the Company in respect of such loss or damage.
It is further declared and agreed that for the purpose of the Personal Accident Cover for the owner driver granted under this Policy, the Insured named in the Policy will continue to be deemed as the owner driver subject to compliance of provisions of the Policy relating to this cover.
Save as by this Endorsement expressly agreed nothing herein shall modify or affect the rights and liabilities of the Insured or the company respectively under or in connection with this Policy.
29. On careful perusal of the records relied and discussed and established on record by the parties, in the light of contentions of both the parties, it is worth to note as to what is the nature of HPA and the legal CS NO. 116/11/07 M/s Pawan Finvest Vs. National Insurance Co. Ltd.. Page No. 17 position of the parties that execute the HPA and their interest in the property/vehicle, the subject matter of such contract.
30. The nature of HPA has been discussed in detail in number of authorities of Higher Courts one of such case is titled as Charanjeet Singh Chaddha & Ors. Vs. Sudhir Mehra cited as AIR 2001 SC 3721 wherein it was observed: Hirepurchase agreements are executory contracts under which the goods are let on the hire and the hirer has an option to purchase in accordance with the terms of the agreement. These types of agreements were originally entered into between the dealer and the customer and the dealer used to extend credit to the customer. But as hirepurchase scheme gained popularity and in size, the dealers who were not endowed with liberal amount of working capital found it difficult to extend the scheme to many customers. Then the financiers came into picture.
The finance company would buy the goods from the dealer and let them to the customer under hire purchase agreement. The dealer would deliver the goods to the customer who would then drop out of the transaction leaving the finance company to collect installments directly from the customer.
Under hire purchase agreement, the hirer is simply paying for the use of the goods and for the option to purchase them.
The finance charge, representing the difference between the cash price and the hire purchase price, is not CS NO. 116/11/07 M/s Pawan Finvest Vs. National Insurance Co. Ltd.. Page No. 18 interest but represents a sum which the hirer has to pay for the privilege of being allowed to discharge the purchase price of goods by instalments.
Thus, it is made clear that until the termination of the HPA, up to the period the Hirer purchase the vehicle, the financier remains the owner of the vehicle.
Further, in a case titled as M/s. Damodar Valley Corporation Vs. State of Bihar (1977) 1 SCR 118 the Apex Court has expressed a view on the nature of contract of hiring. And it was observed that:
"a mere contract of hiring, without more, is a species of the contract of bailment, which does not create a title in the bailee, but the law of hire purchase has undergone considerable development during the last half a century more and has introduced a number of variations, thus leading to categories and it becomes a question of some nicety as to which category a particular contract between the parties come under. Ordinarily, a contract of hire purchase confers no title on the hirer, but a mere option to purchase on fulfilment of certain conditions."
Similarly, in a case, namely, K. L. Zohar & Co. Vs. The Deputy commercial Tax Officer, it was observed that:
"a Hire Purchase agreement has two elements: (1) element of bailment; and (2) element of sale, in the sense that it contemplates an eventual sale. The element of sale fructifies CS NO. 116/11/07 M/s Pawan Finvest Vs. National Insurance Co. Ltd.. Page No. 19 when the option is exercised by the intending purchaser after fulfilling the terms of the above agreement. When all the terms of the agreement are satisfied and the option is exercised as sale takes place of the goods which till then had been hired."
31. Now, on applying the above principles, on the basis of the relevant facts of the case, it is observed that the HPA was a contract entered into the plaintiff and defendant No.2, thus, both the plaintiff and defendant No.2 were bound to the terms and conditions of HPA and except the parties to the contract of HPA none else could be bound for any of such terms, whether it was defendant No.1 that is the insurance company or anybody else. Thus, it is clear that the defendant No.1 is not bound to the terms of contract of the HPA and cannot be called for any liability arisen out of such contract of HPA.
32. Also, so far as the Contract of Insurance is concerned, it was executed between the insurance company, the insurer i.e. defendant No.1 and the insured i.e. defendant No.2. Obviously plaintiff was not the party to such contract and the insurance company was not bound to the liability towards plaintiff of any kind with respect to the vehicle for any kind of claim of insurance raised.
CS NO. 116/11/07 M/s Pawan Finvest Vs. National Insurance Co. Ltd.. Page No. 20
Thus, clearly, in common parlance, there was no privity of contract, between the plaintiff and the defendant No.1, the insurance company, with respect to the HPA Ex.PW1/3. Therefore, the plaintiff cannot claim any liability against defendant No.1 in relation to the HPA, for the liability of the outstanding dues against the defendant No.2.
Similarly there was no privity of contract between the plaintiff and the defendant No.1 with respect to the Contract of Insurance of which the policy was Ex.PW1/4 and the plaintiff cannot claim the sum assured as for such sum assured only the insured i.e. defendant No.2 was entitled.
33. Now, to decide the claim in the suit in the light of contentions of the parties, the relevant terms of HPA are reproduced as below:
V. INSURANCE
1. The Hirer (s) shall obtain and maintain for the entire term of this Agreement at its own expenses, comprehensive insurance against loss or destruction or damage to the motor vehicle including without limitation destruction or loss by fire, theft, comprehensive third party insurance, and such other risks or loss as are customarily insured against in respect of such a motor vehicle as in hired hereunder and in such amounts as shall be satisfactory to the Owner; provided however that the amount of insurance CS NO. 116/11/07 M/s Pawan Finvest Vs. National Insurance Co. Ltd.. Page No. 21 against loss or destruction or damages shall not be less than the greater of the full replacement value of the motor vehicle or the balance hirepurchase installments then remaining unpaid thereon.
2. The insurance shall be in the joint names of the Hirer(s) and the Owner with any insurer approved by the Owner, and shall state that no payment is to be made to the Hirer (s) uner the policy untill the Owner's interest has been fully discharged.
3. The original policies of insurance and renewal notes shall be deposited with the Owner. The Hirer(s) shall duly and punctually pay all the premia on such policies as and when due and shall produce to the Owner for inspection the original receipts and furnish duly certified copies thereof for the Owner record. The Hirer (s) shall ensure that such policies of insurance are kept live during the subsistence of this Agreement and the Hirer(s) shall not do or permit to be done anything by reason of which such insurance may be cancelled.
4. On default of the Hirer(s) to keep the motor vehicle insured as aforesaid, the Owner may, at its discretion but without being bound to do so, effect insurance of the motor vehicle and/or pay the premia in respect thereof and the Hirer(s) hereby undertakes to reimburse the Owner on demand all the amounts paid and/or incurred by the Owner while doing so along CS NO. 116/11/07 M/s Pawan Finvest Vs. National Insurance Co. Ltd.. Page No. 22 with the relevant service charge and penalty, as determined by the Owner.
5. In the event of any claim arising under any such insurance, the Hire(s) shall give to the Owner immediate written intimation thereof and comply with all instructions of the Owner in connection therewith and take all steps, actions and proceedings as may be necessary and if so required by the Owner receive any monies payable in respect thereof for and on behalf of in trust for the Owner and hand over the same to the Owner immediately upon receipt without claiming any part thereof and generally give effectual receipts and discharge and act for an on behalf of the Owner, for the benefit and trust of the Owner and as the Owner may direct.
6. The Hirer(s) hereby irrevocably appoints the Owner, as the agent of the Hirer(s), for the purpose of receiving all monies payable under the said policy and giving a discharge thereafter.
7. If any amount is received from an insurance company under any policy or policies of insurance, the amount so realised may, at the sole discretion and option of the Owner, be utilised in replacement of the lost or damaged equipment or in liquidation of the liability of the Hirer(s) towards the Owner under these presents.
34. Sub clause 5 of V relating to 'insurance' binds the parties to CS NO. 116/11/07 M/s Pawan Finvest Vs. National Insurance Co. Ltd.. Page No. 23 the contract i.e. the defendant No.2 that in the event of any claim arising under any such insurance, the hirer shall give to the owner immediate written intimation thereof and shall receive any monies payable in respect thereof for and on behalf of or in trust for the owner and handover the same to the owner for the benefit and trust of the owner and as the owner may direct.
35. As per the contentions of ld. Counsel for the plaintiff, the clauses relating to HPA of the Contract of Insurance of the defendant No.1 and the analogous similar provisions enshrined in the Contract of Insurance by another insurance company Royal Sunderam Alliance Insurance Company ltd. shows that such provisions in case of HPA are embodied in the Contract of Insurance by the insurance companies in view of the settled policies of IRDA that the financiers who finance the vehicle under HPA has an interest in the property insured (i.e. vehicle in question) and his interest need to be protected against the damage to the vehicle during the subsistence of HPA and shall not be forgotten at the time of releasing/settlement of the claim to be received by the insurer as per the Contract of Insurance and at least shall be protected to the extent of right in the property as the insured acts under the trust and as an agency of the financier when he enters into the contract with the insurance CS NO. 116/11/07 M/s Pawan Finvest Vs. National Insurance Co. Ltd.. Page No. 24 company with respect to the property/vehicle in question financed to him under HPA as per the terms of HPA.
36. The combined effect of above mentioned clause IMT 10 of the Contract of Insurance executed between the defendant Nos.1 & 2, that relates to the liability of the parties in case of fire or theft of the vehicle under HPA and of the Sub Clause 5 of V of the HPA executed between the plaintiff and defendant No.2 is that in case of fire or theft of the vehicle hypothecated under HPA in the name of the financier, the insured (the defendant No.2 herein) shall either collect the insurance claim from the insurance company (the defendant No.1 herein) on behalf of the owner or in trust for the owner and handover the same to the owner or the insurance company (the defendant No.1 herein) on taking no objection from the insured shall pay the sum assured to the owner (the plaintiff herein) towards full and final settlement of the liability of the insured/hirer in relation to the vehicle stolen for which the risk of theft has been covered under the policy as the insured acts under trust and as an agent of the owner/financier of the vehicle under HPA.
37. Thus, in the common parlance of the norms attached with the CS NO. 116/11/07 M/s Pawan Finvest Vs. National Insurance Co. Ltd.. Page No. 25 concept of contract, though the plaintiff has no privity of contract with defendant No.1 under HPA or under the Contract of Insurance, then also in case of the vehicle financed under HPA, if insured with the insurance company against the risk of the theft, in the event of theft of such vehicle, the financier (the plaintiff herein) being the owner under HPA can receive the sum assured either directly from the hirer or from the insurer on no objection by the insured. But in any case such receipt shall be to the extent of sum assured and not beyond that, as the insured receives the sum assured on settlement of claim of insurance on behalf of the financier, but in such eventuality the hirer becomes liable for the outstanding amount due against him with respect to such vehicle only to the extent of the sum assured and his liability qua the vehicle against the financier stand discharged, the moment he hands over the sum received under the claim of insurance for the theft of such vehicle.
38. On the basis of the above facts and circumstances and the law discussed in relation to the HPA and the Contract of Insurance, as it is established on record that the vehicle in question was financed by the plaintiff to the defendant No.2 who could not pay the complete installments to be entitled for becoming an owner on purchase of such vehicle on termination of such contract and the theft committed over such CS NO. 116/11/07 M/s Pawan Finvest Vs. National Insurance Co. Ltd.. Page No. 26 vehicle by someone in the month of November, 2002 during the subsistence of HPA when the plaintiff was still the owner of such vehicle as per terms of HPA, with respect to the vehicle that was insured with the insurance company i.e. defendant No.2, the plaintiff becomes entitled for the claim of sum assured for such vehicle against the full and final settlement of discharge of the liability of the hirer.
39. Now come to the 'interest' part in the suit amount, to the tune of Rs.1,99,430/ as claimed in the suit over and above the sum assured, to the tune of Rs.1,80,000/ claimed by the plaintiff in the suit. The plaintiff has claimed such interest @3% per annum on the basis of terms of HPA. As it is already been above discussed that HPA was executed between the plaintiff and defendant No.2 and the defendant No.1 was not being a party to such HPA cannot be bound by such terms.
40. So far as the Contract of Insurance is concerned, the plaintiff was not the party to that contract, thus the defendant No.2 is not bound by the request and prayer of the claim of interest under such terms of Contract of Insurance. Moreover, no such clause of Contract of Insurance has been pleaded or argued with respect to the interest. CS NO. 116/11/07 M/s Pawan Finvest Vs. National Insurance Co. Ltd.. Page No. 27
41. Further, by concept an interest is a surcharge over the money illegally detained by any person in prejudice to the person who was legally entitled for such amount.
As per the facts established, the sum assured was settled only on compliance of the formalities in 2008 that is during the pendency of the suit and before that the defendant No.1 could not be ask for such surcharge as the insurance claim for sum assured was not settled prior to 2008.
It is also not in dispute that the defendant No.1 has offered and was ready and has already shown his willingness to handover the amount of Rs.1,79,500 (1,80,000500) on settlement of the claim in 2008 either to the defendant No.2 or even to the plaintiff during Mediation proceedings, which was accepted by the plaintiff at that time, thus defendant No.1 was not asked for any interest whatsoever.
Thus the claim of the plaintiff qua interest to the tune of Rs. 1,99,430/ over the sum assured i.e. Rs.1,80,000/ fails in the above noted circumstances.
42. In these circumstances the issue No.1 is decided in favour of plaintiff with respect to the claim of the vehicle hypothecated and in question of the suit only to the extent of the amount of Rs.1,79,500/ that CS NO. 116/11/07 M/s Pawan Finvest Vs. National Insurance Co. Ltd.. Page No. 28 calculates as the difference of the sum assured i.e. an amount of Rs. 1,80,000/ and an amount of Rs.500/ that shall be deducted as per the compulsory excess clause of the insurance. But in that case, defendant No. 2 shall not have any claim from defendant No.1 under Contract of Insurance and the plaintiff shall not have any claim more than that from defendant No. 2 under HPA.
Issue No.1 is decided accordingly.
43. So far as defendant No.2 is concerned, no relief is claimed against him. The defendant No.1 can handover the sum of the settlement of the claim of the insurance of the vehicle directly to the plaintiff. As the defendant No.1 has already complied all the formalities required for the purpose of claim of the insurance, the defendant No.2 gets discharged from the liability under the HPA, as such claim of insurance shall be received by the plaintiff as full and final settlement with respect to the hypothecated vehicle in question.
The suit against defendant No.2 stands dismissed. CS NO. 116/11/07 M/s Pawan Finvest Vs. National Insurance Co. Ltd.. Page No. 29
44. Issue No.3 Relief In view of the above observations and findings on the issues above discussed, the suit of the plaintiff is decreed.
45. Accordingly, the plaintiff is entitled for a money decree against the defendant No.1, who is directed to pay:
i. "An amount of Rs.1,79,500/ only that calculates as the difference of the sum assured i.e. an amount of Rs.1,80,000/ and an amount of Rs.500/ within 15 days from the date of orders/judgment"
ii. In case of not making of the payment within 15 days, defendant No.1 shall also be liable for an interest @ 12% per annum on the amount mentioned in (i) after 15 days from the order till its realization.
No orders as to costs.
Decree sheet be drawn accordingly. File be consigned to Record Room.
Announced In the open Court (Dr. Archana Sinha)
on 06.01.2012 Addl. District Judge,
Centl.04, Tis Hazari Courts,
Delhi. 06.01.2012
CS NO. 116/11/07 M/s Pawan Finvest Vs. National Insurance Co. Ltd.. Page No. 30