GURSHINDER SINGH versus SHRIRAM GENERAL INSURANCE CO. LTD. & ANR. on 24 January 2020

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SUPREME COURT REPORTS

[2020] 2 S.C.R.

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GURSHINDER SINGH

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SHRIRAM GENERAL INSURANCE CO. LTD. & ANR.

(Civil Appeal No. 653 of 2020)

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JANUARY 24, 2020

[N. V. RAMANA, R. SUBHASH REDDY AND B.R. GAVAI, JJ.]

Consumer Protection – Insurance – Standard Form Contract– Commercial Vehicles Package Policy – Appellant’s tractor wasinsured with respondent(s) on 19.06.10 – Tractor stolen on 28.10.10C– FIR lodged on the same day – Claim submitted to the respondent(s)on 15.12.10 – Rejected on the ground that intimation was givenbelatedly – District Forum & State Commission allowed theappellant’s complaint– National Commission dismissed it – Conflictbetween two Judges’ Bench decisions of Supreme Court in OmDPrakash v. Reliance General Insurance & Anr. [2017] 11 SCR 893 &Oriental Insurance Co. Ltd. v. Parvesh Chander Chadha (2018) 9 SCC798, as to whether delay in informing about theft of vehicle toinsurance company, though the FIR was registered immediately,would disentitle the insurance claim – In view thereof, present matterreferred by two Judges’ Bench – Held: Much would depend uponEthe words ‘co-operate’ & ‘immediate’, in condition no.1 of the Policywherein immediate action is contemplated in case of accident of thevehicle – Second part of aforesaid condition deals with ‘theft orcriminal act other than accident’ – While assessing the ‘duty to co-operate’ for the insured, inter alia the Court should have regard toFthose breaches by the insured which are prejudicial to the insurancecompany – Usually, mere delay in informing the theft to the insurer,when the same was already informed to the law enforcementauthorities, cannot amount to breach of ‘duty to co-operate’ of theinsured – View taken in the case of Om Prakash is concurred with,that in such a situation if the claimant is denied the claim merely onGthe ground of delay, it would be taking hyper technical view – Itwas also rightly held that Consumer Act being beneficial legislationdeserves pragmatic construction – When an insured has lodged theFIR immediately after the theft of vehicle and when the police oninvestigation lodged final report after the vehicle was not traced H

and when the surveyors appointed by the insurance company foundthe claim of the theft to be genuine, then mere delay in intimatingthe insurance company cannot be a ground to deny the claim of theinsured – In the present case, facts are undisputed – Impugned orderset aside – Order of District Forum, upheld by State Commission ismaintained – 75% of the claim amount deposited by respondents inRegistry be withdrawn by the appellant with interest accrued thereon– Remainder be paid within six weeks from today with interest @12% p.a. on entire amount of Rs.4,70,000/- from the date of orderof District Forum till its realisation.

Insurance – Contract of insurance – Rules of interpretation– Discussed.

Allowing the appeal, the Court

Conclusion

HELD: 1.1 Much would depend upon the words ‘co-operate’ and ‘immediate’, in condition No. 1 of the Standard Formfor Commercial Vehicles Package Policy. Generally, an insurancecontract is governed by the rules of interpretation applicable tothe general contracts. However, due to the specialized nature ofcontract of insurance, certain rules are tailored to suit insurancecontracts. The contract being interpreted is a Commercial VehiclePackage Policy. There is no gainsaying that in a contract, thebargaining power is usually at equal footing. In this regard, thejoint intention of the parties is taken into consideration forinterpretation of a contract. However, in most standard formcontracts, that is not so. In this regard, the Court in suchcircumstances would consider the application of the rule of contrapreferatum, when ambiguity exists and an interpretation of thecontract is preferred which favors the party with lesser bargainingpower. The insurance policy is a contract between the insurerand the insured and the parties would be strictly bound by theterms and conditions as provided in the contract between theparties. [Paras 10-12][571-B; 572-B-D]

Om Prakash v. Reliance General Insurance & Anr.[2017] 11 SCR 893 – affirmed.

Oriental Insurance Co. Ltd. v. Parvesh Chander Chadha2018 (9) SCC 798 ; T.D.P. Gram Sewa Sahakari SamitiLtd. & Ors. v. Charanjit Kaur and Ors. 2011 (3) CPC

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[2020] 2 S.C.R.

A422 ; New India Assurance Co. Ltd. v. Trilochan Jane(2012) CPJ 441 (NC) – referred to.

Arnold v. Britton [2015] UKSC 36 – referred to.

1.2 The second part of Condition No.1 deals with the ‘theftor criminal act other than the accident’. It provides, that in caseBof theft or criminal act which may be the subject of a claim underthe policy, the insured shall give immediate notice to the policeand co-operate with the company in securing the conviction ofthe offender. The object behind giving immediate notice to thepolice appears to be that if the police is immediately informedCabout the theft or any criminal act, the police machinery can beset in motion and steps for recovery of the vehicle could beexpedited. It is only when the police are not in a position to traceand recover the vehicle and the final report is lodged by the policeafter the vehicle is not traced, the insured would be in a positionto lodge his claim for compensation. [Para 15][573-D-E]D

1.3 The term ‘co-operate’ as used under the contract needsto be assessed in facts and circumstances. While assessing the‘duty to co-operate’ for the insured, inter alia the Court shouldhave regards to those breaches by the insured which areprejudicial to the insurance company. Usually, mere delay inEinforming the theft to the insurer, when the same was alreadyinformed to the law enforcement authorities, cannot amount to abreach of ‘duty to co-operate’ of the insured. The view taken inthe case of Om Prakash is concurred with, that in such a situationif the claimant is denied the claim merely on the ground that thereFis some delay in intimating the insurance company about theoccurrence of the theft, it would be taking a hyper technical view.This Court in Om Prakash rightly held that it would not be fairand reasonable to reject genuine claims which had alreadybeen verified and found to be correct by the investigator.[Paras 17-18][574-C-E]

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1.4 This Court in Om Prakash rightly held that the ConsumerProtection Act aims at protecting the interest of the consumersand it being a beneficial legislation deserves pragmaticconstruction. In Om Prakash this Court rightly held that mere H

delay in intimating the insurance company about the theft of thevehicle should not be a shelter to repudiate the insurance claimwhich has been otherwise proved to be genuine. Therefore, whenan insured has lodged the FIR immediately after the theft of avehicle occurred and when the police after investigation havelodged a final report after the vehicle was not traced and whenthe surveyors/investigators appointed by the insurance companyhave found the claim of the theft to be genuine, then mere delayin intimating the insurance company about the occurrence of thetheft cannot be a ground to deny the claim of the insured. In thepresent case, the facts are undisputed. The police have admittedlylodged the final report. The investigators appointed by theinsurance company have submitted their investigation reportfinding the claim of the appellant to be genuine. In thisbackground, the National Commission was not justified inreversing the concurrent orders of the District Forum and theState Commission. The impugned judgment passed by theNational Commission is quashed and set aside. The order of theDistrict Forum as maintained by the State Commission ismaintained. [Paras 19, 20 & 22][574-F-H; 575-A-C]

Case Law Reference

[2017] 11 SCR 8932018 (9) SCC 7982011 (3) CPC 422(2012) CPJ 441 (NC)

affirmedreferred toreferred toreferred to Para 2Para 2Para 3Para 6

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 653 of2020.

From the Judgment and Order dated 17.03.2015 of the NationalConsumer Disputes Redressal Commission, New Delhi in R. P.No. 2463 of 2013.

Karan Dewan, Rahul Gupta, Advs. for the Appellant.

Naveen Kr. Chauhan, Abhik Kumar, R. S. Chauhan, PraveenSwarup, Advs. for the Respondents.

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AThe Judgment of the Court was delivered by

B. R. GAVAI, J.

1. Leave granted.

2. Noticing that there is a conflict between the decisions of theBBench of the two Judges of this Court in Om Prakash vs. RelianceGeneral Insurance & Anr.[1] and in the case of Oriental InsuranceCo. Ltd. vs. Parvesh Chander Chadha[2], on the question, as to whetherdelay in informing the occurrence of the theft of the vehicle to the insurancecompany, though the FIR was registered immediately, would disentitlethe claimant of the insurance claim. The Bench of two Judges of thisCCourt vide Order dated 09.01.2018 has referred the matter to a three-Judge Bench.

3. The appellant had got his tractor insured with the respondent(s)on 19.06.2010. On 28.10.2010, the tractor was stolen and an FIR waslodged on the same day. However, the claim was submitted to theDrespondent(s) on 15.12.2010. It was rejected on the ground that intimationwas given belatedly after 52 days. The appellant herein, therefore,approached the District Consumer Disputes Redressal Forum, Jalandhar,Punjab, (hereinafter referred to as the “District Forum”) vide ComplaintNo. 380 of 2011. The District Forum, relying on the decisions of theENational Consumer Disputes Redressal Commission (hereinafter referredto as the ‘National Commission’) in the case of Parvesh ChanderChadha (supra) and T.D.P. Gram Sewa Sahakari Samiti Ltd. & Ors.vs. Charanjit Kaur and Ors.[3]., allowed the complaint and directed therespondents to pay a sum of Rs.4,70,000/- being the declared insuredvalue of the vehicle to the complainant within one month from the dateFof receipt of copy of the order, failing which, the respondents were madeliable to pay interest at the rate of 12% per annum from the date oforder till payment.

4. Being aggrieved thereby, the respondents preferred an appealbefore the State Consumer Disputes Redressal Commission, PunjabG(hereinafter referred to as the “State Commission”). The StateCommission dismissed the appeal vide order dated 26.03.2013.

1 Civil Appeal No.15611/ 2017 decided on 04.10.2017

2 Civil Appeal No.6739/ 2010 decided on 17.08.2010; 2009 (1) CLT 552]

H3 2011(3) CPC 422

5. Being aggrieved by the dismissal of the appeal by the StateCommission, the respondents preferred a Revision Petition before theNational Commission. The National Commission relying on its earlierjudgment in the case of New India Assurance Co. Ltd. vs. TrilochanJane[4] allowed the revision petition thereby setting aside the orders ofthe District Forum as well as the State Commission and dismissed thecomplaint. Being aggrieved thereby, the appellant is before this Court.

6. When the matter was heard by the two-Judge bench of thisCourt, it noticed that though in the case of Om Prakash (supra), thetheft of the vehicle was reported to the police on the day after the theftoccurred, the intimation was sent to the insurance company much later.This Court took the view that delay in informing the insurance companywould not debar the insured to get the insurance claim. Per contra, itnoticed that in the case of Parvesh Chander Chadha (supra), this Courtaccepted the contention of the insurance company that on account ofdelay in intimating the insurance company about the theft, though theFIR was lodged immediately, the insurance company was entitled torepudiate the claim of the claimant. Hence, the present appeal.

7. It will be relevant to refer to Condition No.1 of the StandardForm for Commercial Vehicles Package Policy, which reads as follows:

“1. Notice shall be given in writing to the Company immediatelyupon the occurrence of any accidental loss or damage and in theevent of any claim and thereafter the insured shall give all suchinformation and assistance as the Company shall require. Everyletter claim writ summons and/or process or copy thereof shall beforwarded to the Company immediately on receipt by the insured.Notice shall also be given in writing to the company immediatelythe insured shall have knowledge of any impending prosecutioninquest or fatal inquiry in respect of any occurrence which maygive rise to a claim under this policy. In case of theft or criminalact which may be the subject of a claim under this policy theinsured shall give immediate notice to the police and co-operatewith the company in securing the conviction of the offender.”

8. The condition which falls for consideration in the present caseis identical with the condition that fell for consideration in both the cases,namely, Om Prakash (supra) and Parvesh Chander Chadha (supra).

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AIn the case of Parvesh Chander Chadha (supra), the vehicle wasstolen between 18.01.1995 and 20.01.1995. The FIR for the allegedtheft of car was registered on 20.01.1995. However, the intimation wasgiven to the insurer on 22.05.1995. On account of the delay, the claimfor compensation was repudiated by the insurance company for breachof policy. In the said case, the District Forum had allowed the complaintBof the claimant, which order was maintained by the State Commissionas well as the National Commission. However, reversing the concurrentorders, this Court held that though the theft had occurred between18.01.1995 and 20.01.1995, the intimation to the insurance company wasgiven only on 22.05.1995. It observed that no explanation for such anCunusual delay in informing the insurer was given by the claimant. ThisCourt found that in terms of the policy issued by the insurer (appellanttherein), the respondent was duty bound to inform it about the theft ofthe vehicle immediately after the incident. It further observed, that onaccount of delay in intimation, the insurer was deprived of its legitimate right to get an inquiry conducted into the alleged theft of the vehicle andDmake an endeavour to recover the same.

9. Per contra, in the case of Om Prakash (supra), the vehiclewas stolen on 23.03.2010 at around 9.00 p.m. The claimant lodged anFIR immediately on 24.03.2010. He lodged the insurance claim on31.03.2010. Since the claim of the claimant was repudiated, he filedEcomplaint before the District Forum which was allowed. The StateCommission also maintained the order of the District Forum. However,in the revision, the National Commission reversed the same. In an appeal,this Court found that the claimant (the appellant therein) had assignedcogent reasons for the delay of 8 days in lodging the complaint. It furtherFfound that the word “immediately”’ cannot be construed narrowly so asto deprive claimant the benefit of the settlement of genuine claim,particularly when the delay was explained. It further held, that rejectionof the claim on purely technical grounds and in a mechanical mannerwill result in loss of confidence of policy holders in the insurance industry.

It further held, that if the reasons for delay in making a claim isGsatisfactorily explained, such a claim cannot be rejected on the groundof delay. This Court also held that it would not be fair and reasonable toreject the genuine claims which have already been verified and found tobe correct by the investigator. It further held, that the condition regardingthe delay shall not be a shelter to repudiate the insurance claims whichHhave been otherwise proved to be genuine. This Court observed that the Consumer Protection Act aims at providing better protection of the interestof the consumers. It is a beneficial legislation that deserves a liberalconstruction.

10. We are of the view that much would depend upon the words‘co-operate’ and ‘immediate’, in condition No. 1 of the Standard Formfor Commercial Vehicles Package Policy. Before we analyze this caseany further, we need to observe the rules of interpretation applicable toa contract of insurance. Generally, an insurance contract is governed bythe rules of interpretation applicable to the general contracts. However,due to the specialized nature of contract of insurance, certain rules aretailored to suit insurance contracts. Under the English law, thedevelopment of insurance jurisprudence is given credence to LordMansfield, who developed the law from its infancy. Without going muchinto the development of the interpretation rules, we may allude to JusticeNeuberger in Arnold v. Britton[5], which is simplified as under:

(1) reliance placed in some cases on commercial common senseand surrounding circumstances was not to be invoked to undervaluethe importance of the language of the provision which is to beconstrued.

(2) the less clear the words used were, the more ready the courtcould properly be to depart from their natural meaning, but thatdid not justify departing from the natural meaning.

(3) commercial common sense was not to be invokedretrospectively, so that the mere fact that a contractual arrangementhas worked out badly, or even disastrously, for one of the partieswas not a reason for departing from the natural language.

(4) a court should be very slow to reject the natural meaning of aprovision as correct simply because it appeared to be a veryimprudent term for one of the parties to have agreed.

(5) when interpreting a contractual provision, the court could onlytake into account facts or circumstances which existed at thetime that the contract was made and which were known orreasonably available to both parties.

(6) if an event subsequently occurred which was plainly notintended or contemplated by the parties, if it was clear what the 5 [2015] UKSC 36

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Aparties would have intended, the court would give effect to thatintention.[6]

11. A perusal of the aforesaid shows that this contract is to beinterpreted according to the context involved in the contract. The contractwe are interpreting is a Commercial Vehicle Package Policy. There isBno gainsaying that in a contract, the bargaining power is usually at equalfooting. In this regard, the joint intention of the parties is taken intoconsideration for interpretation of a contract. However, in most standardform contracts, that is not so. In this regard, the Court in suchcircumstances would consider the application of the rule of contrapreferatum, when ambiguity exists and an interpretation of the contractCis preferred which favors the party with lesser bargaining power.

12. It is argued on behalf of the respondents and rightly so, thatthe insurance policy is a contract between the insurer and the insuredand the parties would be strictly bound by the terms and conditions asprovided in the contract between the parties.D

13. In our view, applying the aforesaid principles, Condition No. 1of the Standard Form for Commercial Vehicles Package Policy will haveto be divided into two parts. The perusal of the first part of ConditionNo. 1 would reveal, that it provides that ‘a notice shall be given in writingto the company immediately upon the occurrence of any accidental lossEor damage’. It further provides, that in the event of any claim andthereafter, the insured shall give all such information and assistance asthe company shall require. It provides, that every letter claim writsummons and/or process or copy thereof shall be forwarded to theinsurance company immediately on receipt by the insured. It furtherFprovides, that a notice shall also be given in writing to the companyimmediately by the insured if he shall have knowledge of any impendingprosecution inquest or fatal inquiry in respect of any occurrence, whichmay give rise to a claim under this policy.

14. A perusal of the wordings used in this part would reveal, thatGall the things which are required to be done under this part are related toan occurrence of an accident. On occurrence of an accidental loss, theinsured is required to immediately give a notice in writing to the company.This appears to be so that the company can assign a surveyor so as toassess the damages suffered by the insured/vehicle. It further provides, H6 Robert Merkin QC et el., Colinvaux’s Law of Insurance (11th Eds.), p. 159.

that any letter claim writ summons and/or process or copy thereof shallbe forwarded to the company immediately on receipt by the insured. Assuch, the intention would be clear. The question of receipt of letter claimwrit summons and/or process or copy thereof by the insured, would onlyarise in the event of the criminal proceedings being initiated with regardto the occurrence of the accident. It further provides, that the insuredshall also give a notice in writing to the company immediately if theinsured shall have the knowledge of any impending prosecution inquestor fatal inquiry in respect of any occurrence which may give rise to aclaim under this policy. It will again make the intention clear that theimmediate action is contemplated in respect of an accident occurring tothe vehicle.

15. We find, that the second part of Condition No. 1 deals withthe ‘theft or criminal act other than the accident’. It provides, that incase of theft or criminal act which may be the subject of a claim underthe policy, the insured shall give immediate notice to the police and co-operate with the company in securing the conviction of the offender.The object behind giving immediate notice to the police appears to bethat if the police is immediately informed about the theft or any criminalact, the police machinery can be set in motion and steps for recovery ofthe vehicle could be expedited. In a case of theft, the insurance companyor a surveyor would have a limited role. It is the police, who acting onthe FIR of the insured, will be required to take immediate steps fortracing and recovering the vehicle. Per contra, the surveyor of theinsurance company, at the most, could ascertain the factum regardingthe theft of the vehicle.

16. It is further to be noted that, in the event, after the registrationof an FIR, the police successfully recovering the vehicle and returningthe same to the insured, there would be no occasion to lodge a claim forcompensation on account of the policy. It is only when the police are notin a position to trace and recover the vehicle and the final report islodged by the police after the vehicle is not traced, the insured would bein a position to lodge his claim for compensation. As observed by thebench of two learned Judges in the case of Om Prakash (supra), afterthe vehicle is stolen, a person, who lost his vehicle, would immediatelylodge an FIR and the immediate conduct that would be expected of sucha person would be to assist the police in search of the vehicle. Theregistration of the FIR regarding the theft of the vehicle and the final AB

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Areport of the police after the vehicle is not traced would substantiate theclaim of the claimant that the vehicle is stolen. Not only that, but thesurveyors appointed by the insurance company are also required toenquire whether the claim of the claimant regarding the theft is genuineor not. If the surveyor appointed by the insurance company, upon inquiry,finds that the claim of theft is genuine then coupled with the immediateBregistration of the FIR, in our view, would be conclusive proof of thevehicle being stolen.

17. That the term ‘co-operate’ as used under the contract needsto be assessed in facts and circumstances. While assessing the ‘duty toco-operate’ for the insured, inter alia the Court should have regards toCthose breaches by the insured which are prejudicial to the insurancecompany. Usually, mere delay in informing the theft to the insurer, whenthe same was already informed to the law enforcement authorities, cannotamount to a breach of ‘duty to co-operate’ of the insured.

18. We concur with the view taken in the case of Om PrakashD(supra), that in such a situation if the claimant is denied the claim merelyon the ground that there is some delay in intimating the insurance companyabout the occurrence of the theft, it would be taking a hyper technicalview. We find, that this Court in Om Prakash (supra) has rightly heldthat it would not be fair and reasonable to reject genuine claims whichEhad already been verified and found to be correct by the investigator.

19. We find, that this Court in Om Prakash (supra) has rightlyheld that the Consumer Protection Act aims at protecting the interest ofthe consumers and it being a beneficial legislation deserves pragmaticconstruction. We find, that in Om Prakash (supra) this Court has rightlyFheld that mere delay in intimating the insurance company about the theftof the vehicle should not be a shelter to repudiate the insurance claimwhich has been otherwise proved to be genuine.

20. We, therefore, hold that when an insured has lodged the FIRimmediately after the theft of a vehicle occurred and when the policeGafter investigation have lodged a final report after the vehicle was nottraced and when the surveyors/investigators appointed by the insurancecompany have found the claim of the theft to be genuine, then meredelay in intimating the insurance company about the occurrence of thetheft cannot be a ground to deny the claim of the insured.

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21. We, therefore, answer the reference accordingly.

22. In the present case, the facts are undisputed. The theft hadoccurred on 28.10.2010. The FIR was lodged at P.S. Nakodar, Jalandhar,Punjab on the same day i.e. 28.10.2010. The police have admittedlylodged the final report. The investigators appointed by the insurancecompany have submitted their investigation report on 25.02.2011, findingthe claim of the appellant to be genuine. In this background, the NationalCommission was not justified in reversing the concurrent orders of theDistrict Forum and the State Commission. The appeal is, therefore,allowed. The impugned Judgment and order dated 17.03.2015 passedby the National Commission is quashed and set aside. The order of theDistrict Forum dated 09.05.2012 as maintained by the State Commissionvide order dated 26.03.2013 is maintained.

23. The amount, i.e., 75% of the claim amount deposited by therespondents, pursuant to the orders of this Court dated 09.01.2018, inthis Registry shall be permitted to be withdrawn by the appellant hereinalong with interest accrued thereon. The remainder shall be paid by therespondents within a period of six weeks from today along with interestat the rate of 12% per annum on the entire amount of Rs.4,70,000/-from the date of the order of the District Forum till its realisation.

Divya Pandey

Appeal allowed.

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