SHARDA ASSOCIATES versus UNITED INDIA INSURANCE COMPANY LTD on 25 July 2022

1. Leave granted.

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2. This appeal arises from a judgment dated 12 July 2019 of theNational Consumer Disputes Redressal Commission.[1] While exercisingits revisional jurisdiction, the NCDRC, by its judgment, reversedconcurrent findings of fact which were recorded by the District Consumer 1 “NCDRC”

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ADisputes Redressal Forum[2] and by the State Consumer DisputesRedressal Commission.[3]

3. The appellant purchased a JCB Excavator Model 3DX on 25April 2007. The excavator was insured with the respondent for the periodbetween 5 March 2009 and 4 March 2010 at an Insured Declared Value[4]Bof Rs 13.50 lakhs. On 25 May 2009, the excavator was being used onthe Shivpuri-Timli Road near Rishikesh in the State of Uttarakhand. Aportion of the road gave way, as a result of which the excavator fell intoa deep ditch resulting in the death of the operator and helper and thetotal loss of the excavator. A First Information Report was filed on 26May 2009. The FIR states that the accident had occurred due to a suddenCcaving of the road. The surveyor appointed by the insurer conducted aspot survey on 28 May 2009 and reported that the accident had takenplace due to the edge of the road side collapsing due to which theexcavator fell into a ditch. The final survey report was submitted on 18July 2009. The appellant filed for an insurance claim but the insurer didDnot settle it. The respondent repudiated the claim on 13 April 2010 on theground that the overturning of the excavator was not covered in termsof the policy condition Indian Motor Tariff[5 ]47 as the JCB excavatorwas being used as a ‘tool of trade’ and no additional premium was paid.The appellant filed a complaint before the District Forum alleging adeficiency in service on the part of the insurer and the award of a sumEof Rs 13.50 lakhs towards the IDV plus interest at twelve percent, alongwith compensation for mental harassment. The District Forum allowedthe complaint on 26 September 2011 by directing the insurer to pay anamount of Rs 13.50 lakhs, together with interest at nine per cent. Thejudgment of the District Forum was upheld in appeal by the SCDRC onF1 May 2014. On the issue of IMT 47, The SCDRC made the followingobservations:

“9. So far as another plea taken by the insurer that at the time ofthe accident, the machine, was being used as “Tool of Trade”, forwhich additional premium was required to be paid by theGcomplainant and which was not paid by the complainant isconcerned, we also do not find any force in the said plea raised bythe insurer. The reason being that as per IMT 47 mentioned in the 2 “District Forum”

3 “SCDRC”

4 “IDV”H5 “IMT”

insurance policy and which has also been quoted by the DistrictForum in the impugned order, the claim is not payable in the eventwhen the JCB machine is used as tool of Trade and it overturnswhile working as such. In the instant case, the JCB machine wasbeing used for construction of road and debris was being removedfrom the machine. The JCB machine was being used a wholeand not as “Tool of Trade” and since the machine was being useda whole, no additional premium was required to be paid by thecomplainant.”

The respondent assailed the order of the SCDRC in RevisionPetition No 3306 of 2014. The NCDRC, by its judgment dated 12 July2019, reversed the findings and the award of compensation by theSCDRC. The NCDRC reversed the decision on the ground that earthmoving equipment, such as a JCB excavator, could be used either as atool or as a vehicle, at a given point of time. Since the case of therespondent was that the excavator was being used for the purpose ofroad making when it met with an accident, the NCDRC held that it wasbeing used as a tool and not as a vehicle. In arriving at its findings, theNCDRC upheld the submissions of the insurer that the claim could nothave been allowed under IMT 47 unless additional premium was paid.The relevant observations of the NCDRC are extracted below:

“7.A dissection of IMT 47, which applied inter-alia toexcavators and is reproduced in the repudiation letter wouldshow that unless additional premium is paid, in case of lossof or damage to the excavator, the insurer is not liable if thefollowing conditions are made:

(a) The loss or damage results from overturning of the vehicle (b)The excavator is being used as a tool of the vehicle or ofthe plant forming part of the vehicle or attached thereto,unless the loss or damage arises directly from fire, explosion,self-ignition, lightning, burglary, house breaking or theft.

8. An excavator machine cannot be used for road constructionunless it is attached to the said vehicle or is used as a toolof the vehicle. This is complainant’s own case that theexcavator was being used for road making when it metwith an accident. Therefore, it cannot be disputed that theoperation i.e. the construction of the road was being carried A

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Awhen the excavator vehicle while being used as a tool,suddenly rolled down on account of road side edge havinggot broken. Earthmoving equipment such as a JCB can beused either as a tool or as a vehicle at a given time. Itcannot work simultaneously as a tool as well as a vehicle.Since this is complainant’s own case that the excavatorBwas being used for road making when it met with anaccident, it is evident that it was being used as a tool andnot as a vehicle at the time it fell 500 ft. down the road.”

4. We have heard Mr Jaideep Singh, counsel appearing on behalfof the appellant and Mr Abhishek Gola, counsel appearing on behalf ofCthe respondent.

5. The narrow issue which falls for determination in this appealturns on the interpretation of the insurance policy. There is no disputeabout the fact that the term of insurance was valid between 5 March2009 until 4 March 2010. Section I of the policy, inter alia, provides asDfollows:

“SECTION - I: LOSS OF OR DAMAGE TO THE VEHICLEINSURED

1. The Company will indemnify the insured against loss or damageto the vehicle insured hereunder and/or its accessories thereon:

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i.by fire explosion self-ignition or lightning;

ii.by burglary housebreaking or theft;

iii.by riot and strike;

iv.by earthquake (fire and shock damage); F

v.by flood typhoon hurricane storm tempest inundationcyclone hailstorm frost;

vi. by accidental external means; vii. by malicious act;

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viii. by terrorist activity;

ix. whilst in transit by road rail inland waterway lift elevator orair;

x.by landslide/rockslide.”H

SHARDA ASSOCIATES v. UNITED INDIA INSURANCECOMPANY LTD. [DR DHANANJAYA Y CHANDRACHUD, J.]

6. However, the insurance policy contains a specific stipulation inregard to the application of IMT 47 in the following terms:

“IMT 47: Mobile Cranes/ Drilling Rigs/ Mobile Plants/ Excavators/Navvies / Shovels/ Grabs/ Rippers It is hereby declared and agreed notwithstanding anything to thecontrary contained in this Policy that in respect of the vehicleinsured the insurer shall be under no liability:

a) Under Section I of this policy in respect of loss or damageresulting “from overturning arising out of the operation as atool of such vehicle or of plant forming part of such vehicle orattached thereto except for loss or damage arising directly fromfire, explosion self-ignition or lightening or burglaryhousebreaking or theft.

b) Under Section II except so far as is necessary to meet therequirements of the Motor Vehicles Act, 1988, in respect ofliability incurred by the insured arising out of the operation as atool of such vehicle or of plant farming part of such vehicle orattached thereto.

N.B.: Omit paragraph (a) for :-

i.Liability only Policies.

ii. Package Policies where an additional premium has been paidfor inclusion of damage by overturning.

NOTE:

Insert make, number or some other means of identification.

Where a premium reduction is allowed for exclusion of damagewhen in use as a tool of trade omit from paragraph (a) the words“resulting from overturning” and “except for loss ... or theft”.”

7. Mr Jaideep Singh, counsel appearing on behalf of the appellant,urges that:

i.The NCDRC was not justified in reversing concurrent findingsof fact which were recorded by the District Forum and by theSCDRC to the effect that the excavator was not being usedas a tool of trade, when the accident occurred; and A

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Aii. In any event, it is apparent from the survey report as well asthe findings of fact which have emerged on the record that theexcavator suffered an accident due to a landslide or thecollapsing of the road, to which IMT 47 would not standattracted.

B8. On the other hand, Mr Abhishek Gola, counsel appearing onbehalf of the insurer, submitted that IMT 47 was specifically designed tomeet such contingencies in which event the insurer would not be liableunless an additional premium was paid. In this context, counsel reliedupon the complaint which was lodged to the police station whichspecifically adverted to the fact that the soil under the machine hadCcollapsed resulting in the excavator falling into a deep ditch. Moreover,the counsel has also adverted to the survey report, according to which,there was a sudden collapse of the edge of the road side, as a result ofwhich the machine rolled down about 500 meters.

9. In order to attract the applicability of IMT 47, certain specificDconditions have to be fulfilled. IMT 47 excludes liability:

i.Where the loss or damage has resulted from “overturningarising out of the operation as a tool of such vehicle or of plantforming part of such vehicle or attached thereto”; Eii. Unless the loss or damage is directly arising from fire, explosion,self-ignition, lightning, burglary, house breaking or theft.

10. It is important to note that clause 1 of the insurance policy,which has been extracted earlier, specifically covers a loss or damagewhich arises as a consequence of a landslide. IMT 47 applies to a situationFwhere the loss or damage has been caused due to ‘overturning’ arisingout of the operation as a tool of such vehicle or of plant forming part ofsuch vehicle or forming a part thereto. In other words, for the provisionsof IMT 47 to be applied, it is essential to establish that the loss or damagewas caused due to overturning and that the overturning should arise outof the operation as a tool of such vehicle. The NCDRC was persuadedGto adopt the view of the insurer that an excavator could be used eitheras a tool of trade or as a vehicle and, in the present case, since it wasbeing used for the purpose of road construction, it was not being used asa vehicle. However, the line of reasoning of the NCDRC clearly missedthe point that in the present case the accident was caused as a result ofa portion of the road having given way. The accident was in the natureH

of a landslide, as a result of which the vehicle fell into a deep ditchoccasioning the death of the operator and the helper and a total loss ofthe machine.

11. The situation, in the present case, therefore, did not involveloss or damage due to the overturning of the vehicle. Consequently, evenif, for the sake of argument, the submission of the insurer that the vehiclewas being used as a tool were to be accepted, it is impossible to subscribeto the findings of fact of the NCDRC. The damage or loss was not as aresult of the overturning of the vehicle, but was plainly due to the collapsingof the road, which resulted in the vehicle falling into a deep ditch in ahilly terrain of the State of Uttarakhand.

12. Counsel appearing on behalf of the appellant submitted thatNCDRC could not have reappreciated the facts in its revisional jurisdictionof NCDRC under Section 21(b) of the Consumer Protection Act 1986.In a judgment of a three judge Bench in Lourdes Society SnehanjaliGirls Hostel v H&R Johnson (India) Ltd,[6] this Court held that theNCDRC should not have interfered with the concurrent findings of factin the judgments impugned before it, particularly having regard to thenature of jurisdiction conferred upon it by Section 21 of the ConsumerProtection Act 1986:

“17. The National Commission has to exercise the jurisdictionvested in it only if the State Commission or the District Forum haseither failed to exercise their jurisdiction or exercised when thesame was not vested in them or exceeded their jurisdiction byacting illegally or with material irregularity. In the instant case, theNational Commission has certainly exceeded its jurisdiction bysetting aside the concurrent finding of fact recorded in the orderpassed by the State Commission which is based upon valid andcogent reasons. […]”

The limited ambit of the revisional jurisdiction of the NCDRC hasbeen reiterated in subsequent decisions of this Court, most recently inSunil Kumar Maity v State Bank of India.[7]

13. Having regard to the above findings, the judgment of theNCDRC is unsustainable. We accordingly allow the appeal for the reasonsset out above and set aside the impugned judgment and order of the 6 (2016) 8 SCC 286

7 Civil Appeal 432 of 2022 (Arising out of SLP(C) 21711 of 2019

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[2022] 7 S.C.R.

ANCDRC dated 12 July 2019 in Revision Petition No 3306 of 2014. Inconsequence, the judgment of the SCDRC in First Appeal No 201 of2011 dated 1 May 2014, which directed the insurer to pay a sum ofRs 13.50 lakhs to the appellant, together with interest at the rate ofseven per cent from the date of the filing of the consumer complaint,shall stand restored.B

14. Pending application, if any, stands disposed of.

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Bibhuti Bhushan Bose

(Assisted by: Neha Sharma, LCRA)

Appeal allowed.

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