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

CIVIL APPEAL NOS.49-50 OF 2016

(Arising Out of SLP (C) Nos.37534-37535 of 2013)

LAKHMI CHAND

APPELLANT
Vs.

RELIANCE GENERAL INSURANCE

RESPONDENT

J U D G M E N T

V. GOPALA GOWDA, J.
Leave granted.
2.The present appeals arise out of the impugned judgment
and order dated 26.04.2013 in Revision Petition No.

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2032 of 2012 and order dated 23.07.2013 in Review

Petition

No.

Consumer

Disputes

(hereinafter

253

of

2013

passed

Redressal

referred

to

by

the

Commission,
as

the

National

New

Delhi

National

Commission), whereby the petitions challenging the

order dated 29.02.2012 passed by the Haryana State
Consumer Disputes Redressal Commission were dismissed.

3. The brief facts of the case which are required to

appreciate the rival legal contentions advanced by the
learned counsel appearing on behalf of the parties are
stated in brief as hereunder:-

4.The appellant was the owner of a Tata Motors goods

carrying vehicle bearing registration No.HR-67-7492.
The vehicle was insured with the respondent-Company
vide

policy

No.

15019923334104992

with

effect

from

31.07.2009, valid upto 30.07.2010. The risk covered in

this policy was to the tune of Rs.2,21,153/-. The said
vehicle met with an accident on 11.02.2010 on account
of rash and negligent driving of the offending vehicle

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bearing registration no. UP-75-J 9860. In this regard,

an FIR No.66 of 2010 dated 11.02.2010 was registered
with

the

jurisdictional

Police

Station,

Sadar,

Fatehabad, for the offence punishable under Sections

279,

337,

304A

and

427

of

the

Indian

Penal

Code

(hereinafter referred to as the IPC).

5.The

appellant

incurred

expenses

amounting

to

Rs.1,64,033/- for the repair of his vehicle and also

informed the respondent- Company about the accident
and damage caused to his vehicle. In this connection,
the respondent-Company appointed one Mr. Atam Prakash
Chawla, as the Surveyor to assess the damage caused to
the said vehicle. After inspecting the vehicle, the
Surveyor assessed the damage caused to the vehicle at
Rs.90,000/-,
claim

for

whereas
sum

of

the

appellant

Rs.1,64,033/-

had
with

preferred

supporting

bills. In addition to above, the respondent-Company

appointed M/s Innovation Auto Risk Claim Manager for
the purpose of investigation. According to the report

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of the investigator, five passengers were travelling

in

the

goods-carrying

capacity

of

the

vehicle,

vehicle

as

though

per

the

the

seating

registration

certificate was only 1+1. On the basis of findings of

the said report, the respondent-Company vide letter
dated 26.07.2010 rejected the claim of the appellant
for the reason that the loss did not fall within the
scope and purview of the insurance policy.

6.Aggrieved of the letter of rejection of the claim of

the

appellant

Complaint

by

No.517

the
of

respondent-Company,
2010

against

the

he

filed

respondent-

Company dated 17.09.2010 before the District Consumer

Disputes

Redressal

Forum,

Sonepat

(hereinafter

referred to as the District Forum) under Section 12

of the Consumer Protection Act, 1986 for the claim of
Rs.1,64,033/- towards the repair of his vehicle on the
ground that the rejection of the claim amounts to
deficiency in service on the part of the respondentCompany.

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7.

The

respondent-Company

statement

before

the

filed

District

detailed

Forum

written

disputing

the

claim of the appellant. It took the plea that the

complainant had violated the terms and conditions of
the policy, as five passengers were travelling in the
goods-carrying

vehicle

at

the

time

of

accident,

whereas the permitted seating capacity of the motor

vehicle of the appellant was only 1+1.

8.

The District Forum on the basis of the pleadings of

the parties and the materials on record considered the
judgment of the National Commission in the case of
National

Insurance

Co.

Ltd.

Pravinbhai

v.

D.

Prajapati1, wherein it was held that if the number of

persons travelling in the vehicle at the time of the
accident

did

not

have

bearing

on

the

cause

of

accident, then the mere factum of the presence of more

persons

in

the

vehicle

would

not

disentitle

the

insured claimant from claiming compensation under the

1

IV 2010 CPJ 315 (NC)

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policy towards the repair charges of the vehicle paid

by

the

appellant.

The

District

Forum

accordingly

directed the respondent-Company to settle the claim of

the appellant on non-standard basis upto 75% of the
amount

spent

vehicle

after

for

effecting

taking

into

repairs

to

the

consideration

damaged

the

claim

amount of Rs.1,64,033/-. The District Forum further

directed the respondent-Company to settle the amount
to be paid to the appellant along with interest at the
rate of 9% per annum from the date of lodging of the
claim by the appellant with the respondent-Company.
The

respondent-Company

was

further

directed

to

pay

Rs.2,000/- for rendering deficient service, causing

mental

agony

and

harassment

and

towards

litigation

expenses incurred by the appellant.

9.

Aggrieved of the order of the District Forum, the

respondent
State

Company

Commission

preferred

urging

an

various

appeal

before

grounds.

The

the

State

Commission placed reliance upon the judgment of this

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Court in the case of Suraj Mal Ram Niwas Oil Mills (P)
Ltd.

v.

United

India

Insurance

Co.

Ltd.

&

Anr.2,

wherein it was held as under:

Before embarking on an examination of the

correctness of the grounds of repudiation of
the policy, it would be apposite to examine
the nature of a contract of insurance. It is
trite that in a contract of insurance, the
rights and obligations are governed by the
terms of the said contract. Therefore, the
terms of a contract of insurance law have to
be strictly construed and no exception can be
made on the ground of equity.

Thus, it needs little emphasis that in

construing the terms of a contract of
insurance important, 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 risk
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.

(2010) 10 SCC 567

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10.

The State Commission applied the observation made

in the above said case by this Court to the case on

hand and held that the District Forum has committed a
serious error in allowing the complaint filed by the
appellant herein against the respondent-Company. The
State

Commission

accepted

the

appeal

filed

by

the

respondent-Company and dismissed the complaint of the

appellant, vide its order dated 29.02.2012 by setting
aside the judgment and order of the District Forum.

11.

The said judgment passed by the State Commission

was challenged by the appellant before the National

Commission by way of filing Revision Petition No.2032
of 2012 under Section 21(b) of the Consumer Protection
Act, 1986 questioning the correctness of the same by
urging various tenable grounds.

12.

After examining the material evidence on record,

the National Commission has arrived at the conclusion

and held that the factum of the vehicle in question

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carrying six passengers at the time of the occurrence

of the accident was an undisputed fact. Thus, there
had been a violation of the terms and conditions of
the insurance policy covered to the vehicle by the
appellant, as he had allowed six passengers to travel
in the vehicle when the permitted load was only 1+1.
The National Commission upheld the order passed by the
State Commission and dismissed the Revision Petition
filed by the appellant by recording its reasons. The
Review Petition filed against the dismissal of the
Revision

Petition

by

the

appellant

was

also dismissed without considering the grounds urged

for reviewing its order.

13.
the

The present appeals have been filed challenging

orders

passed

by

the

National

Commission

in

dismissing the Revision and Review petitions. In our

considered view, the concurrent findings recorded by
the National Commission in the impugned judgment and
order are erroneous in law for the following reasons.

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14.

It is an admitted fact that the accident of the

vehicle of the appellant was caused on account of rash

and negligent driving of the offending vehicle bearing
registration no. UP-75-J9860. An FIR No. 66 of 2010
dated 11.02.2010 was registered under Sections 279,
337,

338,

against
offences

304-A

the

and

driver

referred

427
of

to

of
the

the

Indian

said

supra.

The

Penal

vehicle

Code

for

the

of

the

vehicle

appellant was badly damaged in the accident and it is

an

undisputed

assessed

the

fact
loss

that
at

the

report

Rs.90,000/-,

but

of

Surveyor

the

actual

amount incurred by the appellant on the repair of his

vehicle

was

Rs.1,64,033/-.

The

said

claim

was

arbitrarily rejected by the respondent-Company on the

ground that the damage caused to the vehicle did not
fall within the scope and purview of the insurance
policy, as there was a contravention of terms and
conditions of the policy of the vehicle.

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15. The

National Commission upheld the order of dismissal

of the complaint of the appellant passed by the State

Commission. The National Commission however, did not
consider the judgment of this Court in the case of
B.V. Nagaraju v. Oriental Insurance Co. Ltd Divisional
Officer, Hassan3. In that case, the insurance company
had taken the defence that the vehicle in question was
carrying more passengers than the permitted capacity
in terms of the policy at the time of the accident.
The said plea of the insurance company was rejected.
This Court held that the mere factum of carrying more
passengers than the permitted seating capacity in the
goods carrying vehicle by the insured

does not amount

to a fundamental breach of the terms and conditions of

the policy so as to allow the insurer to eschew its
liability towards the damage caused to the vehicle.
This Court in the said case has held as under:It is plain from the terms of the Insurance
Policy that the insured vehicle was entitled to
carry six workmen, excluding the driver. If
those six workmen when travelling in the
vehicle, are assumed not to have increased risk
3

(1996) 4 SCC 647

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from the point of view of the Insurance Company

on occurring of an accident, how could those
added persons be said to have contributed to
the causing of it is the pose, keeping apart
the load it was carrying. In the present case
the driver of the vehicle was not responsible
for the accident. Merely by lifting a person or
two, or even three, by the driver or the
cleaner of the vehicle, without the knowledge
of the 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.
(emphasis laid by this Court)
16.

Further,

in

the

case

of

National

Insurance

Company Ltd. v. Swaran Singh & Ors4. a three judge

bench of this Court has held as under:-

49. Such a breach on the part of the insured

must be established by the insurer to show that
not only the insured used or caused or permitted
to be used the vehicle in breach of the Act but
also that the damage he suffered flowed from the
breach.

52. In Narvinvas case (supra) a Division Bench

of this Court observed: The insurance company
complains of breach of a term of contract which
4

(2004) 3 SCC 297

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would permit it to disown its liability under

the contract of insurance. If a breach of a term
of contract permits a party to the contract
complaints of breach to prove that the breach
has been committed by the other party to the
contract. The test in such a situation would be
who would fail if no evidence is led.

69. The proposition of law is no longer resintegra that the person who alleges breach must
prove the same. The insurance company is, thus,
required to establish the said breach by cogent
evident. In the event the insurance company
fails to prove that there has been breach of
conditions of policy on the part of the insured,
the insurance company cannot be absolved of its
liability.
(emphasis laid by this Court)

17.

The judgment in the case of Swaran Singh (supra)

has been followed subsequently in the case of Oriental

Insurance Company Ltd. v. Meena Variyal5, wherein this
Court held as under:-

We shall now examine the decision in Swaran

Singh on which practically the whole of the
arguments on behalf of the claimants were
rested. On examining the facts, it is found
that, that was a case which related to a
claim by a third party. In claims by a third
5

(2007) 5 SCC 428

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party, there cannot be much doubt that once

the liability of the owner is found, the
insurance company is liable to indemnify the
owner, subject of course, to any defence that
may be available to it under Section 149(2)
of the Act. In case where the liability is
satisfied by the insurance company in the
first instance, it may have recourse to the
owner in respect of a claim available in that
behalf, it may have recourse to the owner in
respect of a claim available that behalf.
Swaran Singh was a case where the insurance
company raised a defence that the owner had
permitted the vehicle to be driven by a
driver who really had no licence and the
driving licence produced by him was a fake
one. There Lordships discussed the position
and held ultimately that a defence under
Section
149(2)(a)(ii)
of
the
Act
was
available to an insurer when a claim is filed
either under Section 163-A or under Section
166 of the Act. The breach of a policy
condition has to be proved to have been
committed
by
the
insured
for
avoiding
liability by the insurer. Mere absence of or
production of fake or invalid driving licence
or disqualification of the driver for driving
at the relevant time, are not in themselves
defences available to the insurer against
either the insured or the third party. The
insurance company to avoid liability, must
not only establish the available defence
raised in the proceeding concerned but must
also establish breach on the part of the
owner of the vehicle for which the burden of
proof would rest with the insurance company.
Whether such a burden had been discharged,
would depend upon the facts breach on the
part of the insured concerning a policy
condition, the insurer would not be allowed
to avoid its liability towards the insured

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unless the said breach of condition is so

fundamental
as
to
be
found
to
have
contributed to the cause of the accident.
(emphasis laid by this Court)
18.

It becomes very clear from a perusal of the above

mentioned case law of this Court that the insurance

company, in order to avoid liability must not only
establish

the

defence

claimed

in

the

proceeding

concerned, but also establish breach on the part of

the owner/insured of the vehicle for which the burden
of proof would rest with the insurance company. In the
instant case, the respondent-Company has not produced
any evidence on record to prove that the accident
occurred on account of the overloading of passengers
in the goods carrying vehicle. Further, as has been
held in the case of B.V. Nagaraju (supra) that for the
insurer to avoid his liability, the breach of the
policy must be so fundamental in nature that it brings
the contract to an end. In the instant case, it is
undisputed
account

of

offending

that

the

the

rash

vehicle

by

accident
and
its

was

infact

negligent
driver,

caused

driving
against

of
whom

on
the
a

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criminal case vide FIR no. 66 of 2010 was registered

for

the

offences

referred

to

supra

under

the

provisions of the IPC. These facts have not been taken

into consideration by either the State Commission or
National
jurisdiction

Commission
and

setting

while
aside

exercising
the

order

their
of

the

District Forum. Therefore, the judgment and order of

the National Commission dated 26.04.2013 passed in the
Revision Petition No. 2032 of 2012 is liable to be set
aside, as the said findings recorded in the judgment
are erroneous in law.

19.

Accordingly, we allow these appeals and restore

the judgment and order of District Forum. Further, we

award a sum of Rs.25,000/- towards the cost of the
litigation as the respondent-Company has unnecessarily
litigated the matter up to this Court despite the
clear pronouncement of law laid down by this Court on
the question with regard to the violation of terms and
conditions of the policy and burden of proof is on the

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insurer to prove the fact of such alleged breach of

terms and conditions by the insured.

20.

Since we have restored the judgment and order of

District Forum, we direct the respondent-Company to

pay the amount awarded by the District Forum with
interest and the cost which we have awarded in these
proceedings within six weeks from the date of the
receipt of the copy of this judgment.

CJI.
[T.S. THAKUR]

J.
[V. GOPALA GOWDA]
New Delhi,
January 7, 2016

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ITEM NO.1B-For Judgment

COURT NO.10

SECTION XVII

S U P R E M E C O U R T O F
RECORD OF PROCEEDINGS
Civil Appeal
37535/2013

I N D I A

No(s).49-50/2016 arising from SLP(C) Nos.

LAKHMI CHAND

37534-

Appellant(s)
VERSUS

RELIANCE GENERAL INSURANCE

Respondent(s)

Date : 07/01/2016 These appeals were called for pronouncement

of JUDGMENT today.
For Appellant(s)
Mr. Munawwar Naseem,Adv.
For Respondent(s)
Mr. Garvesh Kabra,Adv.
Hon'ble

Mr.

Justice

V.Gopala

Gowda

pronounced the judgment of the Bench comprising

Hon'ble the Chief Justice and His Lordship.
Leave granted.
The

appeals

are

allowed

in

terms

of

the

signed Non-Reportable Judgment.

(VINOD KUMAR)
COURT MASTER

(MALA KUMARI SHARMA)

COURT MASTER

(Signed Non-Reportable judgment is placed on the file)

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