Delhi High Court
The New India Assurance Co. Ltd. vs M/S. T.T.Finance Ltd. & Ors. on 28 February, 2011
Equivalent citations: AIR 2011 DELHI 121, (2013) 2 ACC 896 (2013) 2 ACJ 997, (2013) 2 ACJ 997
Author: Valmiki J. Mehta
Bench: Valmiki J.Mehta
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ RFA No.211/2001
% 28th February, 2011
THE NEW INDIA ASSURANCE CO. LTD. ...... Appellant
Through: Mr. Pankaj Seth, Advocate
VERSUS
M/S. T.T.FINANCE LTD. & ORS. ...... Respondents
Through: None
CORAM:
HON'BLE MR. JUSTICE VALMIKI J.MEHTA
1. Whether the Reporters of local papers may be
allowed to see the judgment?
2. To be referred to the Reporter or not? Yes
3. Whether the judgment should be reported in the Digest? Yes
VALMIKI J. MEHTA, J (ORAL)
1. The challenge by means of this Regular First Appeal under Section 96 of the Code of Civil Procedure, 1908 is to the impugned judgment and decree dated 17.3.2001 whereby the suit of the respondent/plaintiff/insured against the appellant/defendant/insurance company was decreed.
2. Before the Trial Court and before this court, there were two principal issues on which arguments were addressed. The first was with RFA No.211/2001 Page 1 of 11 respect to the stand of the appellant of lack of privity of contract of the respondent/plaintiff with the appellant and the second was of the respondent/plaintiff being not the owner of the insured vehicle and hence not having an insurable interest in the vehicle with respect to which claim was filed.
3. The facts of the case are that the respondent/plaintiff a finance company, entered into a lease agreement with one Mr. Jagdish Prashad for a Bajaj Matador Tempo No. DL-1L-A-7297 (make 1994) vide agreement dated 17.2.1994 and thereby financed the vehicle. According to the insured/respondent/plaintiff since lease installments were not being paid by Sh. Jagdish Prashad, the vehicle was taken back from him and thereafter given to the respondent no. 2, Sh. Prempal Kashyap under a hire- purchase agreement dated 5.4.1995 and which has been exhibited as Ex. P5. The vehicle was involved with an accident on 28.4.1995 resulting in a total loss of the vehicle. The respondent/plaintiff therefore preferred the claim against the appellant/insurance company/defendant and which having been rejected, the respondent/plaintiff filed the subject suit.
4. The Trial Court after completion of pleadings framed the following issues:-
"1. Whether there is no privity of contract between the defendant no.1 as per submission made in para 2 and 3 of the preliminary objection of the WS of defendant no.1? OPD
2. Whether the plaintiff is a Ltd. Co., the suit has been signed & verified by a duly authorised perons? OPP RFA No.211/2001 Page 2 of 11
3. To what amount is the plaintiff entitled?OPP.
4. Whether the plaintiff is entitled to any interest, if so, at what rate and to what amount?OPP
5. Relief."
5. With respect to the issue of privity of contract, the Trial Court has held as under:-
"The onus of this issue is on the defendant and Ld. counsel for the defendant has stated that there is no privity of contract between the plaintiff and answering defendant no.1 in respect of the suit amount in question and the plaintiff has no locus standi to file the suit against the defendant no.1 in respect of the amount claimed and due against defendant no.2. The defendant no.2 is the insurer of the plaintiff in respect to the insurance policy in question and counsel for defendant no.2 has not challenged the repudiation of the insurance claim and has also not filed any suit challenging the said repudiation of the insurance claim within 12 months from the date of the said repudiation of the insurance claim, the plaintiff has no legal right or authority to challenge the repudiation of the insurance claim on any ground and he has drawn the attention on document Ex.DW1/5 i.e. letter written by the plaintiff do defendant no.1 dated 25.8.95 and Ex.DW2/1 in which it is stated that vehicle was found registered in the name of Sh. Prem Pal Kashyap S/o Sh. Chottey Lal and Ex.DW1/2 and Ex.DW1/3 and D1 i.e. claim form filed by Sh. Prempal Kashyap.
On the other hand Ld. counsel for the plaintiff has strongly opposed the arguments of the Ld. counsel for the defendant and stated that the plaintiff is a Finance Company and vehicle in question was given to one Sh. Jagdish but due to non payment of the installment, Jagdish Prasad handed over the vehicle to the plaintiff vide Ex.PW1/4 and thereafter the said vehicle was given to Sh. Prempal Kashyap vide hire purchase agreement Ex.PW1/5 and he has drawn the attention on the said hire purchase agreement clause 12 & 13 and also drawn the attention on the Ex.P6 i.e. schedule of repayment of the hire purchase agreement & undertaking which was given by Sh. Prempal Kashyap as Ex.P7 and Ex.P8 i.e. letter written by Prempal Kashyap to the plaintiff dated 5.4.95 and Ex.P9 & Ex.P11 i.e. letter dated 9.5.95 written by Prempal to the plaintiff and other Ex.P12 to Ex.P19 and stated that the vehicle has been RFA No.211/2001 Page 3 of 11 given to Sh. Prempal Kashyap on the basis of Ex.P5 i.e. hire purchase agreement but the plaintiff was still the owner of the vehicle. So, the defendant has failed to prove this issue and the plaintiff is entitled for the insurance amount.
In consideration of the submissions made by both the counsels, it is not disputed that the insurance was in the name of M/s T.T.Finance (A/c Jagdish Prasad) but as per the exhibited document Ex.P4, he has returned the vehicle to the plaintiff and the said vehicle was given to Sh. Prempal Kashyap vide Ex.P5. I have also perused the clause no.12, termination by hirer of the said agreement at page 5 wherein it is written that „the hirer may at any time terminate this agreement by returning the product to the owner at the original delivery place. The return of the product shall be at the cost of the hirer and the hirer shall be solely responsible for any damage caused to the product during the course of such return. Upon such termination the hirer shall not be relieved of his obligations to pay any sum then due from him under this agreement including the amounts due to accordance with clause 14(d) hereof nor such termination shall prejudice any claim of the owner or entitle the hirer for the return of any money already paid by the hirer. Clause 13 contemplates termination by owner in the event of (a) Breach by the hirer of any of the terms of this agreement (b) The hirer making default in payment of any sum payable by him under this agreement. In this only (b) clause is relevant because Prempal has not paid the installment which is mentioned in schedule of payment Ex.P6 & as per Ex.P11 Prempal has written letter to the plaintiff that he surrendered the vehicle in question on his own will because the plaintiff can claim from the insurance company."
6. It could not be disputed by learned counsel for the appellant that the cover note/insurance policy was issued by the appellant/insurance company in the name of M/s. T.T. Finance A/c Jagdish Prashad. Merely because after the name of the finance company it is written "A/c Jagdish Prashad" cannot make any difference because a finance company finances various vehicles at one point of time and the object of writing the name of the loanee/customer by the finance company-insured in the cover note/insurance policy is to identify the relevant cover note/insurance with the RFA No.211/2001 Page 4 of 11 specific customer/hirer/loanee out of many who have taken finance from the company. No doubt ordinarily a person who is not party to the contract cannot sue upon the same, however, in my opinion, the facts of the present case clearly show that the contract of insurance was entered into by the appellant/insurance company with the respondent/plaintiff/finance company, and therefore, I reject the argument of the learned counsel for the appellant that there was no privity of contract of the insurance company with the insured. The Trial Court has also rightly, by giving additional reasons arrived at a finding of fact, and portions of which have been reproduced above, to hold that there was in fact privity of contact between the parties.
7. The second issue, and which was very vehemently argued by learned counsel for the appellant, was that the registration certificate with respect to the vehicle was not in the name of the finance company but was in the name of Mr. Prempal Kashyap and therefore since the insurance company was not the owner of the vehicle, there was no insurable interest in favour of the insured entitling the respondent/plaintiff/insured to take out an insurance policy.
Learned counsel for the appellant has very heavily relied upon the decision of the National Consumer Disputes Redressal Commission in the case of New India Assurance Company Ltd. vs. Chandrakant Bhujangrao Jogdand, Revision Petition 4387/09 decided in March, 2010. The decision in the case of Chanderkant Bhujangrao (supra) RFA No.211/2001 Page 5 of 11 however would have no application to the facts of the present case because that was not a case dealing with a finance company taking out an insurance policy with respect to the insured vehicle. Similar is the position with respect to various other judgments which have been cited by learned counsel for the appellant and which I am not reproducing herein as the same do not apply in the facts of the present case.
8. The question is what is an insurable interest? Insurable interest is not complete ownership. It need not necessarily even strictly be title and interest in the object insured. Insurable interest qua a vehicle policy is such interest in the subject matter of insurance whereby the insured can seek to recover the monetary claim for any damage or loss to the insured vehicle. The Supreme Court in the case of New India Assurance Co. Ltd. Vs. B.N. Sainani (1997) 6 SCC 383 has given the meaning of insurable interest as under :-
"15. The interest of the insured must exist in the case of marine insurance at the time of loss and the assured must have some relation to or concern in, the subject of the insurance. The service which the insurer offers is with reference to the goods and the insurable interest has to be in respect of the goods. To put it in other words, insurable interest in property would be such interest as shall make the loss of the property to cause pecuniary damage to the assured."
9. The legal principle applicable qua meaning of an insurable interest will remain the same whether for marine insurance or for motor vehicles. The meaning of insurable interest has been further expounded by a Division Bench of Jammu & Kashmir High Court in the case of M/s. RFA No.211/2001 Page 6 of 11 Oriental Insurance Company Ltd. vs. Sham Lal Matoo AIR 2006 Jammu & Kashmir 103, wherein the Division Bench reproduced and adapted a paragraph from Banerjee‟s Law of Insurance and the same reads as under:-
"13. It may also be advantageous to clarify any cobwebs in this regard by quoting the following passage from Banerjee‟s Law of Insurance:
"Insurable interest is not synonymous with legal interest. Thus an interest on an agreement to purchase is an insurable interest. A warehouse man who has assumed the obligation to insure the goods while in his possession has an insurable interest. Even the interest of a bailee is sufficient to establish an interest and an unpaid vendor of goods as an insurable interest in the property. Similarly, a husband has an insurable interest in his wife‟s property and a wife in turn has an insurable interest in the property of her husband. So also a landlord may insure his rent which he may lose through the destruction of his premises, a tenant of premises has an insurable interest founded upon the beneficial enjoyment of the premises, which he loses in the event of their destruction so also a tenant renting a furnished house has an insurable interest in the furniture. Likewise a creditor whose debt is secured by legal or equitable mortgage upon any specific property has an insurable interest in the property mortgaged. A bankrupt remaining in possession of his estate has an insurable interest in it. A man may also insure the profits which he expects from some undertaking or adventure of from the carrying on a business." (Emphasis added)
10. Another relevant judgment is the Division Bench decision of the Andhra Pradesh High Court in the case reported as United India Insurance Company Ltd. & Ors. vs. Sri Balaji Dental Laboratory 103 (2001) Company cases 58. Following observations of the said judgment are relevant:-
RFA No.211/2001 Page 7 of 11
"The next question is whether the respondent has an insurable interest in the property. The admitted fact is that the respondent is a lessee and he has mortgaged the leasehold interest to the corporation. Learned counsel for the appellant contended that he being not the owner of the property has no insurable interest in the premises insured, therefore, they are not entitled for the insured amount. In this context reference may be made to the judgment of the Gnana Sundaram v. Vulcan Insurance Co.Ltd. [1931] 1 Comp Cas 365 (Rang). The said judgment explains the meaning of "insurable interest". The said judgment reads as follows (pages 369 and 370):
" A man is interested in a thing to whom advantage may arise or prejudice happen from the circumstances which may attend it and whom it importeth that its condition as to safety or other quality should continue. Interest does not necessarily imply a right to the whole or part of the thing, nor necessarily and exclusively that which may be the subject of privation, but the having some relation to, or concern in the subject of the insurance; which relation or concern, by the happening of the perils insured against, may be so affected a to produce a damage, detriment or prejudice to the person insuring. And where a man is so circumstanced with respect to matters exposed to certain risks of dangers as to have a moral certainty of advantage or benefit but for those risks and dangers, he may be said to be interested in the safety of the thing. To be interested in the preservation of a thing is to be so circumstanced with respect to it as to have benefit from its existence, prejudice, from its destruction........
Only those can recover who have an insurable interest, and they can recover only to the extent to which that insurable interest is damage3d by the loss. In the course of the argument, it has been sought to establish a distinction between a fire policy and a marine policy. It has been urged that a fire policy is not quite a contract of indemnity, and that the assured can get something more than what he has lost. It seems to me that there is no justification in authority, and I can see no foundation in reason for any reason, for any suggestion of that kind. What is it that is insured in fire policy? Not the bricks and the materials used in RFA No.211/2001 Page 8 of 11 building the house, but the interest of the assured in the subject-matter of insurance, not the legal interest only, but the beneficial interest."
From the passages referred to above, it is clear that the interest need not be an interest of ownership. It can be an interest other than the ownership also. The facts of the said case are that a suit was filed for recovery of an amount under an insurance policy in respect of a house, and the objection that was raised by the insurance company was that the plaintiff is only an agreement holder and since he has no right of ownership he is not entitled to claim the amount insured. In that context, it was held that an interest need not necessarily be a right to the whole but can be a part. A person is interested in the preservation of a thing and such interest can be insured. The learned judges also held that the insurer can recover an insurable interest and they can recover only to that extent to which that insurable interest is damaged by the loss and not the amount insured as such. In other words, the insurer is entitled to the actual loss or damages sustained and not the amount insured. This judgment is an authority for the proposition that insurable interest need not necessarily be whole interest, it can also be a part of the interest. In our considered view, the right to enjoy the property is transferred and the lessee has interest in part in the leasehold property and he is entitled to continue in possession as long as the lease subsists. His possession should to be disturbed so long as the lease subsists. To enjoy peaceful possession of the premises which he has taken on lease is an interest and it can be said that he has insurable interest in the property. We, therefore, are of the view that the leasehold interest of a lessee is an insurable interest in the property that is insured." (Emphasis added)
11. In the facts of the present case to decide whether the insured had an insurable interest, one will have to see the agreement, Exhibit P5, the hire purchase agreement entered into between the parties. Let us examine the terms of this document to see it any insurable interest can be said to exist in favour of the respondent/plaintiff/insured. In my opinion, there is no doubt at all that there was an insurable interest in favour of the RFA No.211/2001 Page 9 of 11 respondent/plaintiff/finance company inasmuch as the finance company had a right to take possession of the vehicle on default of making payment of loan installments and other defaults by the loanee and the value of which vehicle after disposing of, had to be credited to the account of the loanee for adjusting the dues of the respondent/plaintiff/finance company. The following portion of para 14 of the hire purchase agreement is relevant, more particularly sub para (c), and the same reads as under:-
"14. Rights of Owner on termination
a) Repossession On the termination of this Agreement the Owner or its solely authorized agent shall be entitled to enter upon the premises where the product is situated and take possession of the Product without being liable in any matter whatsoever.
b) Adjustment of sums due On repossession of the Product the Hirer shall forthwith pay to the Owner all Hire Charges in arrears alongwith any other dues upto the date of repossession by the Owner. All costs and charges payable under this Agreement including the cost of repossession and other incidental costs and costs incurred in putting the Product in a proper state of repair will be due and payable by the Hirer to the Owner. It is expressly agreed that in no event will any sum already paid under the provisions of this Agreement be refundable by the Owner to the Hirer.
c) Sale of Product Upon repossession of the product the Owner shall have the sole right to sell the product and in the event of any short fall between the sum of the sale proceeds and any sum due to the Owner under this Agreement the amount of such shortfall shall be paid by the Hirer to the Owner on demand and in the event of delay the Hirer shall continue to pay instalments of Hire Charges RFA No.211/2001 Page 10 of 11 as stipulated herein. The Hirer shall render all necessary assistance and execute and handover all necessary papers and documents as may be required by the Owner to effect such sale.
d) Payment of Instalments Upon this Agreement being terminated the Hirer shall pay to the Owner the Periodical Hire Charge for the remaining period of the Agreement duly discounted at such rate as may be determined by the Owner alongwith other dues including late charge."
12. In view of the above, it is quite clear that there did exist an insurable interest in favour of the respondent company with respect to the insured vehicle, and therefore, I do not find any merit in the arguments raised on behalf of the appellant that there was no insurable interest of the respondent/plaintiff so that it could have been insured the subject vehicle.
13. In view of the above, I do not find any illegality or perversity in the impugned judgment and decree which calls for any interference by this Court in appeal. The appeal is accordingly dismissed, leaving the parties to bear their own costs. Trial Court record be sent back.
FEBRUARY 28, 2011 VALMIKI J. MEHTA, J.
ak
RFA No.211/2001 Page 11 of 11