Supreme Court of India
ECONOMIC TRANSPORT ORGANIZATIONversusM/S. CHARAN SPINNING MILLS (P) LTD. AND ANR
- Citation
- 2010 INSC 103
- Decided
- 17 February 2010
- Disposal
- Dismissed
- Bench
- K G BALAKRISHNAN
Holding
An insurer, as a subrogee, may file a consumer complaint only in the assured's name or jointly with the assured, not in its own name, and the presumption of negligence under the Carriers Act applies; the Oberai decision is only partially correct.
Summary
The appellant, a carrier, appealed against a complaint filed by the assured (a consignor who was also a consumer) and the insurer under the Consumer Protection Act, 1986, seeking compensation for loss of a consignment. The goods were insured, the insurer paid the assured, and the assured executed a Letter of Subrogation‑cum‑Special Power of Attorney in favour of the insurer. The lower consumer forums allowed the complaint, holding the insurer could sue as a subrogee. The Supreme Court held that an insurer, as a subrogee, may file a complaint only in the name of the assured or jointly with the assured, but not in its own name, and that the presence of assignment language in the subrogation document does not affect maintainability. The Court affirmed the presumption of negligence under Section 9 of the Carriers Act and rejected the appellant’s claim that proof of negligence was required. It also partially overruled the Oberai decision, stating that Oberai correctly held that an insurer alone cannot maintain a consumer complaint. The appeal was dismissed, upholding the orders of the lower forums.
Issues considered
- Whether a Letter of Subrogation‑cum‑Assignment ceases to be a subrogation and becomes a pure assignment.
- Whether an insurer, as a subrogee, can lodge a complaint under the Consumer Protection Act in the name of the assured or jointly with the assured.
- Whether an insurer, as an assignee, can file a complaint in its own name before a consumer forum.
- Whether relief can be granted against a carrier without proof of negligence, relying on the presumption under Section 9 of the Carriers Act.
- Whether the decision in Oberai Forwarding Agency v. New India Assurance Co. Ltd. is good law.
Legislation cited
- Carriers Act, 1865s. 9
- Consumer Protection Act, 1986s. 14(1)(d), s. 2(1)(g), s. 2(d) (as amended by Amendment Act 62 of 2002)
- Indian Contract Act, 1872s. 140
- Marine Insurance Act, 1963s. 79
- Transfer of Property Act, 1882s. 6(e)
Subjects
subrogationassignmentconsumer complaintinsurer rightscarrier liabilitynegligence presumptionCarriers ActConsumer Protection ActOberai caseinsurance law
Judgment
[201 O] 2 S.C.R. 887
ECONOMIC TRANSPORT ORGANIZATION A
v.
M/S. CHARAN SPINNING MILLS (P) LTD. AND ANR
(Civil Appeal No. 5611 of 1999)
FEBRUARY 17, 2010
B
[K.G. BALAKRISHNAN, CJI., R.V. RAVEENDRAN, D.K.
JAIN, P. SATHASIVAM AND J.M. PANCHAL, JJ.]
Consumer Protection Act, 1986:
c
ss. 2(1 )(g) and 14(1 )(d) - Deficiency in service ,-
Complaint - Maintainability of - Contract of insurance -
Consignment of goods - Damaged in transit - Compensation
paid by insurer to consignor/assured - Execution of letter of
subrogation-cum-special power of attorney by consignor in D
favour of insurer - Claim of compensation by consignor and
insurer against carrier - Allowed by fora below - On appeal,
held: Insurer, as subrogee, can file a complaint under the Act
either in the name of assured (as his attorney holder) or in
joint names of assured and insurer for recovery of amount
due from the service provider - It can request the assured to E
sue the wrong doer - Insurer cannot in its own name maintain
a complaint, even if its right is traced to the terms of a Letter
of Subrogation-cum-Assignment - On addition of words of
assignment to Jetter of subrogation, the complaint would be
maintainable so long as it is in the name of assured and F
insurer figures in the complaint only as attorney holder or
subrogee of assured - Document whether subrogation
simpliciter or subrogation-cum-assignment is not relevant for
deciding the maintainability of a complaint - On facts,
presumption regarding negligence u/s. 9 was not rebutted - G
Loss of eonsignment by assured and settlement of claim by
insurer established by evidence - Thus, order of fora below
not interfered with - Carriers Act, 1865 - s. 9.
887 H
888 SUPREME COURT REPORTS [201 O] 2 S.C.R.
A Insurance - Difference between 'subrogation' and
'assignment' - Held: Equitable assignment of rights and
remedies of assured in favour of insurer, implied in a contract
of indemnity, is known as 'subrogation' - It occurs
automatically, when insurer settles the claim under the policy,
B by reimbursing the entire loss suffered by assured - It need
not be evidenced by any writing - Assignment refers to transfer
of a right by instrument for consideration - When there is
absolute assignment, assignor is left with no title or interest
in the property or right, which is the subject matter of
c assignment.
Subrogation - Principles of - Explained.
Subrogation - Three categories - Subrogation by
equitable assignment; subrogation by contract; and
D subrogation-cum-assignment - Explained.
Insurance contract - Settlement of claim - Execution of
document by assured in favour of insurer, deed of
Subrogation simpliciter or Subrogation-cum-Assignment -
E Held: Depends upon the intention of parties as evidenced by
the wording of document - Title or caption of document, by
itself, may not be conclusive - If intention was to have only a
subrogation, use of words "assign, transfer and abandon in
favour of' would in the context be construed as referring to
F subrogation only.
Reconsideration of the decision in *Oberai Forwarding
Agency v. New India Assurance Co. Ltd. - Held: Oberai's
case is not good law insofar as it construes a Letter of
Subrogation-cum-Assignment, as a pure and simple
G assignment - But to the extent it holds that an insurer alone
cannot file a complaint under the Act, the decision was correct.
s. 2(d) ( as amended by Amendment Act 62 of 2002) -
Addition of words 'but does not include a person who avails
H of such services for any commercial purpose' in the definition
ECONOMIC TRANSPORT ORGANIZATION v. CHARAN 889
SPINNING MILLS (P) LTD.
of 'consumer' - Applicability of amendment to complaint filed A
before the amendment - Held: Not applicable.
Transfer of Property Act, 1882:
s. 6 - Letter of subrogation containing terms of
assignment - Held: Cannot be treated only as an assignment B
by ignoring the subrogation, otherwise document itself
becomes invalid and unenforceable, having regard to the bar
contained in s. 6 - But when letter of subrogation-cum-
assignment is executed, assignment is interlinked with
subrogation, and not being an assignment of a mere right to C
sue, will be valid and enforceable.
Words and Phrases:
'Subrogation and 'Assignment'- Meaning of.
D
The first respondent-assured/consignor entrusted
consignment of goods for transportation to the appellant-
ca rrier. The said consignment was insured with the
second respondent-insurer covering the transit risk. The
goods were damaged in an accident. The insurer settled E
the claim of the assured. On receiving the payment, the
first respondent executed a Letter of Subrogation-cum-
S pec ia I Power of Attorney in favour of the second
respondent. Respondent no. 1 and 2 filed complaint
before the District Consumer Forum claiming F
compensation. The District Forum allowed the complaint
and the same was upheld by the Fora below. Hence the
present appeal.
The present appeal was referred to a larger bench for · G
reconsideration of the decision in *Oberai Forwarding
Agency v. New India Assurance Co. Ltd. case, which in turn
referred the matter to the present Constitution Bench.
The questions which arose for consideration are:
H
890 SUPREME COURT REPORTS [2010] 2 S.C.R.
A (a) Where the letter of subrogation executed by an
assured in favour of the insurer contains, in addition
to words referring to subrogation, terms which may
amount to an assignment, whether the document
ceases to be a subrogation and becomes an
B assignment?
(b) Where the insurer pays the amount of loss to the
assured, whether the insurer as subrogee, can lodge
a complaint under the Act, either in the name of the
assured, or in the joint names of the insurer and
c assured as co-complainants?
(c) Where the rights of the assured in regard to the
claim against the carrier/service provider are
assigned in favour of the insurer under a letter of
D subrogation-cum-assignment, whether the insurer
as the assignee can file a complaint either in its own
name, or in the name of the assured, or by joining the
assured as a co-complainant?
(d) Whether relief could be granted in a complaint
E
against the carrier/service provider, in the absence ·
of any proof of negligence?
(e) and whether the decision in Oberai's case is a
good law?
F
Dismissing the appeal, the Court
HELD: On Questions (a) to (c):
1. The assured entrusted the consignment for
G transportation to the carrier. The consignment was
Insured by the assured with the insurer. When the goods
were damaged in an accident, the assured, as the
consignor-consumer, could certainly maintain a
complaint under the Act, seeking compensation for the
H
ECONOMIC TRANSPORT ORGANIZATION v. CHARAN 891
SPINNING MILLS (P) LTD.
loss, alleging negligence and deficiency in service. The A
fact that in pursuance of a contract of insurance, the
assured had received from the insurer, the value of the
goods lost, either fully or in part, does not erase or reduce
the liability of the wrongdoer responsible for the loss.
Therefore, the assured as a consumer, could file a B
complaint under the Act, even after the insurer had settled
its claim in regard to the loss. [Para 10] [915-H; 916-A-C]
2.1. A contract of insurance is a contract of indemnity.
The loss/damage to the goods covered by a policy of C
insurance, may be caused either due to an act for which
the owner (assured) may not have a remedy against any
third party (as for example when the loss is on account
of an act of God) or due to a wrongful act of a third party,
for which he may have a remedy against such third party ,,.,
(as for example where the loss is on account of D '·
negligence of the third party). In both cases, the assured·
can obtain reimbursement of the loss, from the insurer.
In the first case, neither the assured, nor the insurer can
make any claim against any third party. But where the
damage Is on account of negligence of a third party, the E )
· assured will have the right to sue the wrongdoer for
damages; and where the assured has obtained the value
of the goods lost from the insurer in pursuance of the
contract of insurance, the law of insurance recognizes as·
an equitable corollary of the principle of indemnity that F
the rights and remedies of the assured against the wrong-
, doer stand transferred to and vested in the insurer. The
equitable assignment of the rights and remedies of the
assured in favour of the insurer, implied in a contract of
indemnity, known as 'subrogation', is based on two basic G
principles of equity: (a) No tort-feasor should escape liability
for his wrong; (b) No unjust enrichment for the injured, by
recovery of compensation for the same Joss, from more than
one source. The doctrine of subrogation will thus enable
892 SUPREME COURT REPORTS [2010] 2 S.C.R.
A the insurer, to step into the shoes of the assured, and
enforce the rights and remedies available to the assured.
An 'assignment' on the other hand refers to a transfer of
a right by an instrument for consideration. When there is
an absolute assignment, the assignor is left with no title
B or interest in the property or right, which is the subject
matter of ttte assignment. [Paras 11 and 13] [916-C-H; 917-
A; 920-A-B]
Vasudeva Mudaliar vs. Caledonian Insurance Co .. AIR
C 1965 Mad. 159, referred to. ·
National Fire Insurance Co. vs. McLaren 1886 (12) OR
682; Banque Financiere de la Cite vs. Pare (Battersea) Ltd.
1999 (1) A.C. 221; James Nelson and Sons Ltd. vs. Nelson
Line (Liverpool) Ltd. (No. 1) 1906 (2) KB 217, referred to.
:D
Black's Law Dictionary; Dan B. Dobb's Law of Contract
2nd Edn 4.3 p 404; Laurence P. Simpson's Handbook on
Law of Suretyship 1950 Edn. p 205; Insurance Law by
MacGillivray & Parkington (7th Edn.), referred to.
E 2.2. Subrogation, as an equitable assignment, is
inherent, incidental and collateral to a contract of
indemnity, which occurs automatically, when the insurer
settles the claim under the policy, by reimbursing the
entire loss suffered by the assured. It need not be
F evidenced by any writing. But where the insurer does not
settle the claim of the assured fully, by reimbursing the
entire loss, there will be no equitable assignment of the
claim enabling the insurer to stand in the shoes of the
assured, but only a right to recover from the assured, any
G amount remaining out of the compensation recovered by
the assured from the wrongdoer, after the assured fully
recovers his loss. [Para 14] [922-E-G]
2.3. To avoid any dispute with the assured as to the
H
ECONOMIC TRANSPORT ORGANIZATION v. CHARAN 893
SPINNING MILLS (P) LTD.
right of subrogation and extent of its rights, the insurers A
usually reduce the terms of subrogation into writing in
the form of a Letter of Subrogation which enables and
authorizes the insurer to recover the amount settled and
paid by the insurer, from the third party-wrong doer as a
Subrogee-cum-Attorney. When the insurer obtains an B
instrument from the assured on settlement of the claim,
whether it will be a deed of subrogation, or subrogation-
cum-assignment, would depend upon the intention of
parties as evidenced by the wording of the document. ·
The title or caption of the document, by itself, may not be c
conclusive. It is possible that the document may be styled
as 'subrogation' but may contain in addition an
assignment in regard to the balance of the claim, in which
event it will be a deed of subrogation-cum-assignment.
It may be a pure an~ simple subrogation but may 0
inadvertently or by way of excessive caution use wor.ds
more appropriate to an assignment. If the terms clearly
show that the intention was to have only a subrogation,
use of the words "assign, transfer and abandon in favour
of" would in the context be construed as referring to E
subrogation and nothing more. [Para 14] [922-G-H; 923-
A-D]
2.4. The subrogations can be classified under three
broad categories: (i) subrogation by equitable
assignment; (ii) subrogation by contract; and (iii) F
subrogation-cum-assignment. In all three types of
subrogation, the insurer can sue the wrongdoer in the
name of the assured. This means that the insurer
requests the assured to file the suit/complaint and has the
option of joining as co-plaintiff. Alternatively the insurer G
can obtain a special power of Attorney from the assured
and then to sue the wrongdoer in the name of the assured
as his attorney. [Para 15] (923-D-E; 924-F-G]
2.5. The assured has no right to deny the equitable
right of subrogation of the insurer in accordance with law, H
894 SUPREME COURT REPORTS [2010] 2 S.C.R.
- t
A even whether there is no writing to support it. But the
assured whose claim is settled by the insurer, only in
respect of a part of the loss may insist that when
compensation is recovered from the wrongdoer he will
first appropriate the_ same, to r-ecover the balance of his
B loss. The assured can also refuse to execute a
subrogation-cum-assignment which has the effect of
taking away his right to receive the balance of the loss.
But once a subrogation is reduced to writing, the rights
inter-se between the assured and insurer will be regulated
c by the terms agreed, which is a matter of negotiation
between the assured and insurer. [Para· 15) (924-H; 925-
A-B]
2.6. If a letter of subrogation containing terms of
assignment is to be treated only as an assignment by
D ignoring the subrogation, there may be the danger of
document itself becoming invalid and unenforceable,
having regard to the bar contained in section 6 of the
Transfer of Property Act, 1882. Section 6 of 1882 Act
provides that property of any kind may be transferred
~ E except as otherwise provided by that Act or by any other
law for the time being in force. Clause (e) of the said
section provides that mere right to sue cannot be
transferred. A transfer or assignment of a mere right to
sue for compensation will be invalid having regard to
F section 6(e) of the TP Act. But when a letter of
subrogation-cum-assignment is executed, the
assignment is interlinked with subrogation, and not being
an assignment of a mere right to sue, will be valid and
enforceable. (Para 16) [925-C-E; 925-G-H]
G
2.7. The principles relating to subrogation can be
summarized as:
(i) Equitable right of subrogation arises when the
insurer settles the claim of the assu~ed, for the entire loss.
H
ECONOMIC TRANSPORT ORGANIZATION v. CHARAN 895
SPINNING MILLS (P) LTD.
When there is an equitable subrogation in favour of the A
insurer, the insurer is allowed to stand in the shoes of the
assured and enforce the rights of the assured against the
wrong-doer.
(ii) Subrogation does not terminate nor puts an end 8
to the right of the assured to sue the wrong-doer and
recover the damages for the loss. Subrogation only
entitles the insurer to receive back the amount paid to the
assured, in terms of the principles of subrogation.
(iii) Where the assured executes a Letter of C
Subrogation, reducing the terms of subrogation, the
rights of the insurer vis-a-vis the assured will be
governed by the terms of the Letter of Subrogation.
(iv) A subrogation enables the insurer to exercise the o
rights of the assured against third parties in the name of
the assured. Consequently, any plaint, complaint or
petition for recovery of compensation can be filed in the
name of the assured, or by the assured represented by
the insurer as subrogee-cum-attorney, or by the assured E
and the insurer a~ co-plaintiffs or co-complainants.
(v) Where the assured executed a subrogation-cum-
assignment in favour of the insurer (as contrasted from
a subrogation), the assured is left with no right or interest.
Consequently, the assured will no longer be entitled to F
sue the wrongdoer on its own account and for its own
benefit. But as the instrument is a subrogation-cum-
assignment, and not a mere assignment, the insurer has
the choice of suing in its own name, or in the name of
the assured, if the instrument so provides. The insured G
becomes entitled to the entire amount recovered from the
wrong-doer, that is, not only the amount that the insured
had paid to the assured, but also any amount received
in excess of what was paid by it to the assured, if the
instrument so provides. [Para 17] [927-A-H; 927-A] H
I
'
896 SUPREME COURT REPORTS [2010] 2 S.C.R.
A 3.1. Whether the document executed by the assured
in favour of the insurer is a subrogation simpliciter, or a
.subrogation-cum-assignment is relevant only in a dispute
between the assured and the insurer. It may not be
relevant for deciding the maintainability of a complaint
B under the Act. If the complaint is filed by the assured
(who is the consumer), or by the assured represented by
the insurer as its attorney holder, or by the assured and
the insurer jointly as complainants, the complaint will be
maintainable, if the presence of insurer is explained as
·C being a subrogee. Whether the amount claimed is the
total loss or only the amount for which the claim was
settled would make no difference for the maintainability
of the complaint, so long as the consumer is the
complainant (either personally or represented by Its
D attorney holder) or is a co-complainant along with his
subrogee. On the other hand, if the assured (who is the
consumer) is not the complainant, and the insurer alone
files the complaint in its own name, the complaint will not
be maintainable, as the insurer is not a 'consumer', nor
E a person who answers the definition of 'complainant'
under the Act. The fact that it seeks to recover from the
wrongdoer (service provider) only the amount paid to the
assured and not any amount in excess of what was paid
to the assured will also not make any difference, if the
F assured-consignor is not the complainant or co-
complainant. The complaint will not be maintainable
unless the requirements of the Act are fulfilled. The
remedy under the Act being summary in nature, once the
consumer is the complainant or is a co-complainant, it will
G not be necessary for the Consumer Forum to probe the
exact nature of .relationship between the consumer
(assured) and the insurer, in a complaint against the
service provider. [Para 19] [929-G-H; 939-A-E]
3.2. If in a summary proceedings by a consumer
H
ECONOMIC TRANSPORT ORGANIZATION v. CHARAN 9§7
SPINNING MILLS (P) LTD.
against a service provider, the insurer is added as a co- A
complainant or if the insurer represents the consumer as
a power of attorney, there is no need to examine the
nature of rights inter-se between the consumer and his
insurer. When the complaint is by the consignor-
consumer, with or without the insurer as a co- B
complainant, the service provider cannot require the
consumer forum to consider the nature of relationship
between the assured and the insurer or the nature and
true purport of the document produced as a letter of
subrogation. A wrong-doer cannot sidetrack the issue c
before the consumer forum. Once the 'consumer', that is
the assured, is the complainant, the complaint will be
maintainable subject to fulfillment of the requirements of
t,he Act. [Para 20] [931-A-D]
3.3. A document should be transaction-specific. Or at D
least an effort should be made to delete or exclude
inapplicable or irrelevant clauses. But where a large
number of documentation is required to be done by
officers not-conversant with the nuances of drafting, use
of standard forms with several choices or alternative E
provisions is found necessary. The person preparing the
document is required to delete the terms/clauses which
are inapplicable. But that is seldom done. The result Is
that the documents executed in standard forms will have
several irrelevant clauses. Computerisation and large F
legal departments should have enabled insurance
companies, banks and financial institutions to ~I) improve
their documentation processes and omit unnecessary
and repetitive clauses; (ii) avoid incorporation of other
documents by vague references; and (iii) discontinue G
pasting or annexing of slips. But that is seldom done. If
documents are clear, specific and self-contained,
disputes and litigations will be considerably reduced.
[Para 22] [935-8-E]
H
898 SUPREME COURT REPORTS [2010] 2 S.C.R.-
A 3.4. The use of the words "we hereby assign, transfer
and abandon to you all our actionable rights, title and
interest" in the document, is in regard to rights and
remedies against (1) railway administration (2) sea carriers
(3) agents of sea carriers (4) port authorities (5) customs
B authorities and (6) persons whomsoever is liable in
respect thereof. Even though, the matter relates to
carriage of goods by road, the claims or remedies against
a road carrier are not even mentioned. Excluding the ~
irrelevant clauses, the document continues to be a letter
c of subrogation. [Para 21] [934-G-H; 935-A]
Correctness of oberia's case:
4.1. There is no doubt that in Oberia's case the first
portion which stated that all rights were assigned,
D transferred and abandoned in favour of the insurer_ and
also empowered the insurer to sue in its own name, if read
in isolation would amount to an assignment. But if those
words are read with the other recitals and the words "in
consideration of your paying to us the sum of Rs.64,137/
E - only in full settlement of our claim for non-delivery/
shortage and damage, under policy issued by you .... "
make it clear that it was a subrogation-cum-assignment.
Further, the second operative portion which states that
"we hereby subrogate to you the same rights as we have
F in consequence of or arising from the said loss or
damage" are not words of assignment. When the words
used are: "we hereby subrogate to you" and not "we
h\;reby transfer or assign in your favour", having regard
to the settled meaning of "subrogate", the said words
G could not operate as an absolute assignment, but only
as an subrogation. The genesis of the document is
subrogation. The inclusion of an assignment is an
additional right given to the insurer. The document did
not cease to be a subrogation by reason of enlargement
of subrogation by granting such additional right. Thus,
H
ECONOMIC TRANSPORT ORGANIZATION v. CHARAN 899
SPINNING MILLS (P) LTD. .,
Oberai's case was not correctly decided, as it held a A
'subrogation-cum-assignment' as a mere 'assignment'. It
ignored the fact that, shorn of the cover and protection
of subrogation, the document, if read as a simple
assignment would fall foul of section 6(e) of Transfer of
Property Act and thus would be unenforceable. But the B
ultimate decision in Oberai may be correct as the
complaint was filed by the insurer, in its own name and
on its own behalf making a claim for the entire value of
the .goods, in excess of what was paid to the as·sured.
Though the assured was belatedly impleaded as a co- C
complainant, the nature and contents of the complaint
was not apparently changed, and continued to be one by
the insurer as assignee. On those peculiar facts, the
finding that the complaint under the Act by the insurer
(who was not a consumer) was not maintainable, was
0
justified. [Para 23] [937-8-H; 938-A-C]
4.2. Para 23 of the decision in Oberai's case does not
mean that when the consignment is received by the
carrier from the consignor and put it in the course of
transportation, the carrier has provided the service and E
thereafter either ceases to be a service provider or
ceases to be responsible for delivery of the goods, and
that consequently, the consignor ceases to be a
'consumer'. All that it meant was that in a contract for
carriage of goods between the consignor and the carrier, F
if the consignor assigns the right to claim damages to an
assignee, after the goods are lost or damaged, the
assignee cannot claim to be a 'consumer' under the Act.
It impliedly meant that if the assignment had been done
before the loss or damage to the goods, then the G
assignment would have been in regard to 'property' and
not a mere right to sue, and the assignee as consignee
would be entitled to sue the carrier. [Para 23] [938-0-G]
H
900 SUPREME COURT REPORTS [2010] 2 S.C.R.
A Question (d):
5. Section 14(1)(d) of the Act contemplates award of
compensation to the consumer for any loss suffered by
consumer due to the negligence of the opposite party
(Carrier). Section 9 of Carriers Act does not lay down a
8 preposition that a carrier will be liable even if there was
no negligence on its part. On the other hand, it merely
raises a presumption that when there is loss or damage
or non-delivery of goods entrusted to a carrier, such loss,
damage or non-delivery was due to the negligence of the
C carrier, its servant and agents. Thus, where the consignor
establishes loss or damage or non-delivery of goods, it
is deemed that negligence on the part of the carrier is
established. The carrier may avoid liability if it establishes
that the loss, damage or non-delivery was due to an act
D of God or circumstances beyond its control. Section
14(1)(d) of the Act does not operate to relieve the carrier
against the presumption of negligence created u/s. 9 of
the Carriers Act. The submission that the presumption u/
s. 9 of the Carriers Act is available only in suits filed
E before civil courts and not in other civil proceedings
under other Acts, is not tenable. It cannot be accepted
that the presumption u/s. 9 of Carriers Act is not available
in a proceeding under the Consumer Protection Act and
that therefore, in the absence of proof of negligence, it is
F not liable to compensate the respondents for the loss.
[Paras 27, 28 and 29] [940-D-G; 940-H; 941-A; 942-C]
Patel Roadways Ltd. v. Bir/a Yamaha Ltd. 2000 (4) SCC
91; Economic Transport Organization vs. Dharward District
G Khadi Gramodyog Sangh 2000 (5) SCC 78, relied on.
Amendment of s. 2(d):
6. Section 2(d) of Act was amended by Amendment
Act 62 of 2002 with effect from 15.3.2003, by adding the
H words "but does not include a person who avails of such
ECONOMIC TRANSPORT ORGANIZATION v. CHARAN 901
SPINNING MILLS (P) LTD.
services for any commercial purpose" in the definition of A
'consumer'. After the said amendment, if the service of
the carrier had been availed for any commercial purpose,
then the person availing the service will not be a
'consumer' and consequently, complaints will not be
maintainable in such cases. But the said amendment will B
not apply to complaints filed before the amendment. [Para
25] (939-E-G]
Conclusion:
7.1. (a) The insurer, as subrogee, can file a complaint C
under the Consumer Protection Act, 1986 either in the
name of the assured (as his attorney holder) or in the
joint names of the assured and the insurer for recovery
of the amount due from the service provider. The insurer
may also request the assured to sue the wrong doer D
(service provider).
(b) Even if the letter of subrogation executed by the
assured in favour of the insurer contains in addition
to the words of subrogation, any words of
assignment, the complaint would be maintainable so E
long as the complaint is in the name of the assured
and insurer figures in the complaint only as an
attorney holder or subrogee of the assured.
(c) The insurer cannot in its own name maintain a F
complaint before a consumer forum under the Act, .
even if its right is traced to the terms of a Letter of
subrogation-cum-assignment executed by the
assured.
(d) Oberai is not good law insofar as it construes a G
Letter of subrogation-cum-assignment, as a pure
and simple assignment. But to the extent it holds that
an insurer alone cannot file a complaint under the ·
Act, the decision is correct. [Para 24] (939-G-H; 939-
A·D] H
902 SUPREME COURT REPORTS [2010] 2 S.C.R.
A *Oberai Forwarding Agency v. New India Assurance Co.
Ltd. 2000 (2) sec 407, Partly overruled.
7.2. In the instant case, the loss of consignment by
the assured and settlement of claim by the insurer by
paying Rs.4,47,436/- is established by evidence. Having
B
regard to the presumption regarding negligence under
section 9 of Carriers Act, it was not necessary for the
complainants to prove further that the loss/damage was
due to the negligence of the appellant or its driver. The
presumption regarding negligence was not rebutted.
C Therefore, the District Forum was justified in allowing the
complaint brought by the assured (first respondent)
represented by the insurer and the insurer for recovery
of Rs.447,436. The said order was affirmed by the State
Forum and the National Forum. There is no reason to
D interfere with the same. [Para 30] [942-D-G]
Case Law Reference:
1886 (12) OR 682 Referred to. Para 12
E 1999 (1) A.C.221 Referred to. Para 12
1906 (2) KB 217 Referred to. Para 13.
AIR 1965 Mad. 159 Referred to. Para 13
2000 (2) sec 407 Partly overruled. Para 24
F
2000 (4) sec 91 Relied on. Para 28
2000 (5) sec 78 Relied on. Para 29
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
G 5611 of 1999.
From the Judgment & Order dated 19. 7.1999 of the
National Consumer Disputes Redressal Commission in R.P.
No. 368 of 1999.
H
ECONOMIC TRANSPORT ORGANIZATION v. CHARAN 903
SPINNING MILLS (P) LTD.
G.E. Vahanvati, Sol. Genl. of India Atul Nanda, Rameeza A
Hakeem, Sandeep Bajaj, Kishore Rawat, Dhiraj (for M.K. Dua)
Dalip K. Malhotra, Pawan K. Bhal, Rajesh Malhotra, M.M.
Kashyap, Dr. Meera Agarwal, Goodwill lndeevar, S.L. Gupta,
Ram Ashray, K.L. Nandwani, Laskhmi Narayanan, V.
Ramasubramanian, Debasis Misra, A.K. Raina, Binay K. Das, B
Anil Kumar Jha, Joy Basu, Ruchi Bharda, B.K. Satija, Maiban
N. Singh, Anil Nauriya, Pyoli and Sumita Hazarika for the
Appellant.
B. Sen, R.K. Singh, Deepa Rai, Jay Savla, Meenakshi C
Ogra, Rumi Chanda, K.K. Tyagi, lftekhar Ahmad, P.
Narasimhan, A.K. Raina, Binay K. Das, R.D. Upadhyay, Dinesh
Chander Yadav, Vibhuti Sushant, A.S. Rishi, Dr. Kailash
Chand, Ajay Garg, Sanjay Garg, K.V. Viswanathan, Rishi
Maheshwari, Shally Bhasin Maheshwari, Vikramjeet Banerjee,
Megha Mukerjee, Anup Kumar (N.P. on 3.12.2008) and · D
Abhishek Kaushik, (N.P. on 3.12.2008) for the Respondents.
The Judgment of the Court was delivered by
R.V. RAVEENDRAN, J. 1. This appeal was referred by E
a two-Judge Bench to a larger bench on 30.11.2000, being of
the view that the decision of this Court in Oberai Forwarding
Agency v. New India Assurance Co. Ltd. -2000 (2) SCC 407,
required reconsideration. In turn, the three-Judge Bench has
referred the matter to a Constitution Bench on 29.3.2005.
F
Factual Background :
2. The first respondent (also referred to as the 'Assured'
or the 'consignor') is a manufacturer of the cotton yarn. It took
a policy of insurance from the second respondent (National G
Insurance Co. Ltd, referred to as the 'Insurer'), covering transit
risks between the period 11.5.1995 and 10.5.1996 in respect
of cotton yarn sent by it to various consignees through rail or
road against theft, pilferage, non-delivery and/or damage. The
first respondent entrusted a consignment of .hosiery cotton yarn H
904 SUPREME COURT REPORTS [2010] 2 S.C.R.
A of the value of Rs.7,70,948/- to the appellant (also referred to
as the 'carrier') on 6.10.1995 for transportation and delivery to
a consignee at Calcutta. The goods vehicle carrying the said
consignment met with an accident and the consignment was
completely damaged. On the basis of a surveyor's certificate
B issued after assessment of the damage, the second
respondent settled the claim of the first respondent for
Rs.447,436/- on 9.2.1996. On receiving the payment, the first
respondent executed a Letter of Subrogation-cum-Special
Power of Attorney in favour of the second respondent on
c 15.2.1996. Thereafter, respondents 1 and 2 filed a complaint
under the Consumer Protection Act, 1986 ('Act' for short)
against the appellant before the District Consumer Disputes
Redressal Commission, Dindigul, claiming compensation of
Rs.447,436/- with interest at 12% per annum, for deficiency in
D service, as the damage to the consignment was due to the
negligence on the part of the appellant and its servants. It was
averred that the insurer as subrogee was the co-complainant
in view of the statutory subrogation in its favour on settlement
of the claim and the letter of subrogation-cum-special power
E of attorney executed by the Assured.
3. The District Forum by its order dated 8.11.1996 allowed
the complaint and directed the appellant to pay Rs.447,436/-
with interest at the rate of 12% per annum from the date of
accident (8.10.1995) till date of payment to the Insurer, on the
F basis of the subrogation. The District Forum held that the failure
to deliver the consignment in sound condition was a deficiency
in service, in view of the unrebutted presumption of negligence
arising under sections 8 and 9 of the Carriers Act, 1865. The
appeal filed by the appellant before the State Consumer
G Disputes Redressal Commission, Madras, challenging the said
order was dismissed on 2.4.1998. The appellant thereafter filed
a revision before the National Consumer Disputes Redressal
Commission in the year 1999. The National Commission
dismissed the appellant's revision petition by a short non-
H speaking order dated 19.7.1999 which reads thus: "We do not
ECONOMIC TRANSPORT ORGANIZATION v. CHARAN 905
SPINNING MILLS (P) LTD. [RV. RAVEENDRAN, J.]
find any illegality or jurisdictional error in the order passed by A
the State Commission." The said order is challenged in this
appeal by special leave.
The Issue
4. The appellant herein resisted the complaint on the B
following grounds:
(i) The Assured (consignor) had insured the goods against
transit risk with the Insurer. The Insurer had already settled
the claim of the Assured. As a consequence, the Assured c
had no surviving claim that could be enforced against the
carrier. At all events, as the Assured had transferred all its
interest in the claim to the Insurer, it had no subsisting
interest or enforceable right.
D --
(ii) The Insurer did not entr-ust the consignment to the carrier
for transportation. The appellant did not agree to provide
any service to the Insurer. There was no privity of contract
between the Insurer and the appellant. As a result, the
Insurer was not a 'consumer' as defined in the Act and a
complaint under the Act was not maintainable. E
(iii) The letter of subrogation was executed by the Assured
(consignor), after the goods were damaged. This
amounted to a transfer of a mere right to sue by the
Assured in favour of the Insurer, which was invalid and F
enforceable.
(iv) There was no negligence on the part of its driver and
the accident occurred due to circumstances beyond his
control. The respondents did not place any evidence to
prove any negligence, in spite of appellant's denial of G
negligence. Having regard to s.ection 14(1 )(d) of the Act,
liability can be fastened on a carrier, for payment of
compensation, only by establishing that the consumer had
suffered loss or injury due to the negligence of the carrier
as a service provider. In view of the ~ecial provision in H
906 SUPREME COURT REPORTS [201 O] 2 S.C.R.
A section 14(1 )(d) of the Act, the complainants under the Act
were not entitled to rely upon the statutory presumption of
negligence available under section 9 of the Carriers Act,
1865 which is available in civil suits brought against
carriers. In the absence of proof of negligence, it was not
B liable to pay compensation for damage to the goods.
5. After leave was granted in this case on 27.9.1999, a
three-Judge Bench of this Court rendered its decision in Oberai
Forwarding Agency on 1.2.2000, making a distinction between
C 'assignment' and 'subrogation'. This Court held that where
there is a subrogation simpliciter in favour of the insurer on
account of payment of the loss and settlement of the claim of
the assured, the insurer could maintain an action in the
Consumer Forum in the name of the assured, who as consignor
was a consumer. This Court further held that when there is an
D assignment of the rights of the assured in favour of the insurer,
the insurer as assignee cannot file a complaint under the Act,
as it was not a 'consumer' under the Act. This Court held that
even if the assured was a co-complainant, it would not enable
the insurer to maintain a complaint under the Act, if it was an
E assignee of the claim. We extract below the relevant portion of
the said judgment:
"17. In its literal sense, subrogation is the substitution of
one person for another. The doctrine of subrogation
F confers upon the insurer the right to receive the benefit of
such rights and remedies as the assured has against third
parties in regard to the loss to the extent that the insurer
has indemnified the loss and made it good. The insurer
is, therefore, entitled to exercise whatever rights the
assured possesses to recover to that extent compensation
G
for the loss, but it must do so in the name of the assured.
xxxxx
·19. With the distinction between subrogation and
H assignment in view, let us examine the letter of subrogation
ECONOMIC TRANSPORT ORGANIZATION v. CHARAN 907
SPINNING MILLS (P) LTD. [RV. RAVEENDRAN, J.]
executed by the second respondent in favour of the first A
respondent. Its operative portion may be broken up into
two, namely, (i) "we hereby assign, transfer and abandon
to you all our rights against the Railway Administration,
road •transport carriers or other persons whatsoever,
caused or arising by reason of the said damage or loss B
and grant you full power to take and use all lawful ways and
means in your own name and otherwise at your risk and
expense to recover the claim for the said damage or loss";
and (ii) 'we hereby subrogate to you the same rights as
we have on consequence of or arising from the said loss c
or damage".
20. By the first clause the second respondent assigned and
transferred to the first respondent all its rights arising by
reason of the loss of the consignment. It granted t~e first
respondent full power to take lawful means to recover the D ,
claim for the loss, and to do so in its own name. If it were
a mere subrogation, first, the word "assigned" would not
be used. Secondly, there would not be a transfer of all the
second respondent's rights in respect of the loss but the
transfer would be limited to the recovery of the amou~t paid E
by the first respondent to the second respondent. ™"dly,
the first respondent would not be entitled to take steps to
recover the loss in its own name; the steps for recovery
would have to be taken in the name of the second
respondent. Thus, by the first clause there was an F
assignment in favour of the first respondEmt.
21. The second clause, undoubtedly, used the word
"subrogate", but it conferred upon the first respondent "the
same rights" that the second respondent had "in
c~nsequence of or arising from the said los's or damage", G
which meant that the transfer was not HIJiifed to the
quantum paid by the first respondent to: the second
respondent but encompassed ~fl the compensation for the (•
loss. Even by the· second clause, therefore, 'there was an
H
908 SUPREME COURT REPORTS [2010] 2 S.C.R.
A assignment in favour of the first respondent.
22. Learned counsel for the first respondent submitted that
the letter of subrogation and the special power of attorney
should be read together and, so read, it would be seen
B that the first respondent was not an assignee of the second
respondent's rights but was merely subrogated to them.
The terms of .the letter of subrogation are clear. They
cannot be read differently in the light of another, though
contemporaneous, document.
c 23. Now, as is clear, the loss of the consignment had
already occurred. All that was assigned and transferred by
the second respondent to the first respondent was the right
to recover compensation for the loss. There was no
question of the first respondent being a beneficiary of the
D service that the second respondent had hired from the
appellant. That service, namely, the transportation of the
consignment, had already been availed of by the second
respondent, and in the course of it the consignment had
been lost. The first respondent, therefore, was not a
E "consumer" within the meaning of the Consumer Protection
Act and was, therefore, not entitled to maintain the
complaint.
24. By reason of the transfer and assignment of all the
rights of the seconc:I respondent in the first respondent's
F favour, the second respondent retained no right to recover
compensation for the loss of the consignment. The addition
of the second respondent to the complaint as a co-
complainant c;lid not, therefore, make the complaint
maintainable."
G
6. The referring BenGh which heard this appeal considered
the decision in Oberai. It was of the view that Oberai required
reconsideration by a larger Bench, for the following reasons
(vide order dated 30.11.2000) :
H
ECONOMIC TRANSPORT ORGANIZATION v. CHARAN 909
SP.INNING MILLS (P) LTD. [R.V. RAVEENDRAN, J.]
"In the case of simple subrogation in favour of an A
insurance company, there is no difficulty in accepting that
the insurance company gets subrogated to the rights of the
consumer wherein the insurance company has paid
compensation to the consumer pursuant to the contract
entered into between the consumer and the insurance B
company. As per the principle referred to in the judgment
in Oberai Forwarding Agency's case (supra), if there was
simple subrogation, then the insurance company could
maintain an action in the consumer court but it had to do
so in the name of the consumer. It could not sue in its own ·c
name. Certainly that was the law laid down earlier by this ·
Court and this is also a part of the common law. That was •
the position before the National Commission in Transport ·
'
•·
Corporation of India Ltd vs. Devangara Cotton Mills Ltd.,
reported in 1998 (2) CPJ 16 (NC), which is referr~d to in D
paragraph 16 of the judgment in Oberai Forwarding
,.
.\
Agency (supra). But in the earlier judgment in Green
Transport Co. vs. New India Assurance Co. Ltd., (19e2)
2 CPJ 349 (NC) wherein the insurer had claimed a right
of subrogation or transfer of the right of action which the E
insured had as against the transporter. There it was held
that the complaint in the consumer court was not
maintainable. In Transport Corporation of India Ltd's case,
the National Commission distinguished the judgment in
Green Transport Co., wherein the complaint was held not
F
to be maintainable. In other words, this Court in Oberai
Forwarding Agency's case (supra) felt that where there was
an assignment in addition to subrogation, the complaint
was not maintainable even though the original consumer
as well as the Insurance Company to whom the rights
stood subrogated and assigned were the complainants. G
The crucial reasoning is set out in paragraphs 23 and 24
of the judgment in Oberai Forwarding Agency (supra)
which we have already set out above.
So far as paragraph 23 of the said judgment is concerned.
910 SUPREME COURT REPORTS [201 O] 2 S.C.R.
A it states that in case the right to recover the compensation
is assigned to the Insurance Company, there is no question
of the Insurance Company being a 'beneficiary' of the
services which the consumer had hired through the
transport company. Hence, section 2(b) of the Consumer
B Protection Act, 1988 would not apply. This Court also
observed that 'service' namely, the transportation of the
consignment had already availed of by the consumer. The
Insurance Company therefore, was not a consumer within
the meaning of the provisions of the Consumer Protection
c Act, 1986 and therefore, not entitled to maintain the
complaint.
It is contended for the appellant, relying on the above
passages (para 23 in Oberai) that once the goods are
handed over to a transporter for the purpose of transport,
D the services have already been rendered and that
therefore, the consignor ceases to be a consumer. But it
is pointed out for the respondent that the contract. between
the consumer and the transport company is to safely
.transport the goods through he entire distance and hand
E them over for delivery to the consignee at the opposite
end. If the goods have been lost during transport, services
are not fully-rendered - and a cause of action has arisen
to the consignor (consumer) to recover the same, the
consignor continues to be a consumer after the services
F are rendered and will be a consumer entitled to
compensation (rather than goods) against the transport
company. He does not, it is contended for the respondent,
cease to be consumer. There is a breach of contract and
the right of the consignor is to recover compensation. If,
G therefore, at such a stage the consignor is still a consumer
entitled to sue for compensation, he is certainly entitled in
that capacity to move the consumer court as a complainant.
. That is how it is contended for the respondents that the
consignor is in the position of a co-complainant.
H
.,.
ECONOMIC TRANSPORT ORGANIZATION v. CHARAN 911
SPINNING MILLS (P) LTD. [RV. RAVEENDRAN, J.]
So far as assignment of the rights in favour of the A
insurance company is concerned, it is contended for the
respondents that one has to keep in mind that a simple
assignment of a right to recover may, in law be bad, on
the ground of 'champerty/maintenance' and that·is why, in
these formats, it is coupled with subrogation. Once there B
is subrogation the insurance company is suing in the
consignor's right as 'consumer' because the ·consignor has
not got the full services rendered in his favour, the goods
not having reached their destination. An assignment
coupled with rights of subrogation would be valid in law c
because then it will not be a case of a mere assignment
of a right to sue.
In other words, on the date when the assignment is made,
the consignor namely the consumer is still a consumer who
has lost his goods and he is entitled to compensation for D
the loss of the goods by the transport company. Once the
consignor receives the money from the Insurance
company, the insurance company becomes subrogated as
an indemnifier to all the rights of the consumer including
the right to sue as a consumer. But the complaint must then E
be in the name of the consignor. In fact, that is the precise
position on Transport Corporation of India Ltd. vs.
Davangere Cotton Mills Ltd. - 1998 (2) CP J 16. It was
held that the consignor could still sue notwithstanding the
fact that compensation was paid by the insurance F
company. The only extra thing that happens in the event
of the assignment in favour of the insurance company is
that the insurance company becomes entitled to file the
complaint in its own name by virtue of the assignment. The
insurance company may not be a consumer to start with G
but it is subrogated to the rights of the consumer
(consignor) to whom services were not fully rendered.
When we came to paragraph 24 of the judgment in Oberai
Forwarding Agency (supra), it is stated that upon the H
912 SUPREME COURT REPORTS [2010] 2 S.C.R.
A transfer by assignment of all the rights of the consumer in
favour of the insurance company, the consumer retained
no right to recover compensation for the loss of
consignment and therefore, the addition of the consignee
as a co-complainant does not make the complaint
B maintainable. It is contended for the respondents that the
law is well settled that there cannot be a bare assignment
of a right to sue. But if such a right is coupled with the right
of subrogation the action is maintainable by the assignee,
.who is suing for those rights and who need no longer
c implead the consignor. In fact, the principle in Transport
Corporation of India Ltd., which has been accepted by the
three Judge Bench itself says that if there is subrogation,
the insurance company could sue in the name of consignor. ,
The effect of the assignment is not to destroy the character
of the insurance company as a person entitled to the rights
D
of the consumer (because of subrogation) but also to
provide an independent right to sue in its own name.
Merely, because there is an assignment it does not follow
that the complainant - insurer was not also clothed with
the rights of the consignor as a consumer, if on the date
E of assignment the consignor was still entitled to
compensation as consignor. The reasoning in paragraph
24 of the judgment appears to be closely intertwined with
the reasoning in paragraph 23. As long as the goods had
not been delivered, the consignor does not lose the right
F to claim compensation as a consumer and he still remains
the consignor and to that rights, the Insurance company
becomes subrogated. It is contended for the respondent
that thus the insurance company is having the rights of the
consignor as consumer by virtue of the rights subrogated
G to it and is also entitled to maintain the complaint as an
assignee in its own right.
It is pointed out for the respondents that, in fact, the result
of the judgment of the three judge bench has been that a
large number of cases which have been decreed in favour
H
ECONOMIC TRANSPORT ORGANIZATION v. CHARAN 913
SPINNING MILLS (P) LTD. [RV. RAVEENDRAN, J.]
of the consignees in various consumer fora in this country A
have been rendered infructuous. The insurance company
and the consignors became compelled to move the civil
court once again after several years and to seek the benefit
of section 14 of the Limitation Act. There was no other
benefit accruing to the transporter. It is contended that a s
purposeful interpretation is to be given to the provisions
of the Consumer Protection Act and one of the purpose is
that consumers might get expeditious relief outside the civil
courts.
It is contended alternatively that looking at the matter from C
another angle, the insurance company as a third party -
indemnifier pays compensation to the consumer and
redresses an immediate grievance and makes the
insured to go back into this business. In such a situation,
merely because a third party indemnifier pays money to D
the insured, the latter does not cease to be a consumer
and the status of the consignor as a consumer still
continues. Because there is a breach of contract the
consumer can sue for compensation along with the
insurance company and does not lose his right to sue for E
compensation. The right to sue before the consumer court
is available either with the consignor or with the consignee
and does not vanish into thin air, in spite of the assignor
and assignee being co-complainants. In this connection,
the decision in Compania Colombia De Sequros vs. F
Pacific Steam Navigation Co. etc., reported in 1964 (1)
ALL ER 216 is also relied upon for the respondent. It
contains an extensive discussion of the point involved.
T~ere the assignment was obtained after the accident and
after the Insurance Company paitj the money to the G
consignor.
In our view, the above contention of the respondent are
substantial and a case is made out for reconsideration of
Oberai Forwarding Agency.
H
914 SUPREME COURT REPORTS [2010] 2 S.C.R.
A 7. The appellant contends that Oberai lays down the law
correctly. It is submitted that what is executed in favour of the
Insurer, though termed a 'subrogation' is an assignment, and
therefore, the Insurer was not entitled to maintain the complaint.
Relying on the observations in para 23 of Oberai Forwarding
B Agency, it was contended that once the goods entrusted to the·.
appellant for transportation were lost/damaged, no 'service'
remained to be rendered or performed by the appellant as
carrier; that what was assigned and transferred by the Assured
to the Insurer was only the right to recover compensation for
C the loss and there was no question of Insurer being the ~
beneficiary of any service, for which the Assured had hired the
appellant; and therefore such post-loss assignment of the right
to recover compensation, did not result in the Insurer becoming
a 'consumer' under the Act. The Respondents, on the other
hand, contended that the decision in Oberai required
0
reconsideration on several grounds, set out in the reference
order.
8. On the contentions urged, the following questions arise
for consideration:
E
(a) Where the letter of subrogation executed by an assured
in favour of the insurer contains, in addition to words
referring to subrogation, terms which may amount to an
assignment, whether the document ceases to be a
F subrogation and becomes an assignment?
(b) Where the insurer pays the amount of loss to the
ass:.!n:~d. whether the insurer as subrogee, can lodge a
complaint under the Act, either in the name of the assured,
or in the joint names of the insurer and assured as co-
G complainants?
(c) Where the rights of the assured in regard to the claim
against the carrier/service provider are assigned in favour
of the insurer under a letter of subrogation-cum-
H assignment, whether the insurer as the assignee can file
ECONOMIC TRANSPORT ORGANIZATION v. CHARAN 915
SPINNING MILLS (P) LTD. [R.V. RAVEENDRAN, J.]
a complaint either in its own name, or in the name of the A
assured, or by joining the assured as a co-complainant.
(d) Whether relief could be granted in a complaint against
the carrier/service provider, in the absence of any proof
of negligence?
B
Re : Questions (a) to (c) and the correctness of Oberai
9. A 'complaint', in the context of this case, refers to an
allegation in writing made by a 'consumer' that the services
availed of or hired (or agreed to be availed of or hired) suffer c
from 'deficiency' in any respect (vide section 2(c) of the Act).
A 'consumer' is defined under section 2(d) of the Act, relevant
portion of which is extracted below: .
"Consumer" means any person who -
(. D
xxxxx
(ii) hires or avails of any services for a consideration which
has been paid or promised or partly paid any partly
promised, or under any system of deferred payment and E
includes and beneficiary of such services other than the
person who hires or avails of the services for consideration
paid or promised or partly paid and partly promised, or
under any system of deferred payment, when such
services are availed of with the approval of the first F
mentioned person ....... "
"Deficiency" means any fault, imperfection, short-c.:oming, or
inadequacy in the quality, nature and manner of performance
which is required to be maintained by or under any law for the
time being in force or has been undertaken to be performed G
by a person in pursuance of a contract or otherwise in relation
to any service (vide section 2(g) of the Act).
10. The assured entrusted the consignment for
transportation to the carrier. The consignment was insured by H
916 SUPREME COURT REPORTS [2010] 2 S.C.R.
A the assured with the insurer. When the goods were damaged
in an accident, the assured, as the consignor-consumer, could
certainly maintain a complaint under the Act, seeking
compensation for the loss, alleging negligence and deficiency
in service. The fact that in pursuance of a contract of insurance,
8 the assured had received from the insurer, the value of the
µoods lost, either fully or in part, does not era·se or reduce the
liability of the wrongdoer responsible for the loss. Therefore, the
assured as a consumer, could file a complaint under the Act,
even after the insurer had settled its claim in regard to the loss.
c f 1. A contract of insurance is a contract of indemnity. The
loss/damage to the goods covered by a policy of insurance,
may be caused either due to· an act for which the owner
(assured) may not have a remedy against any third party (as
for example when the loss is on account of an act of God) or
D due to a wrongful act of a third party, for which he may have a
remedy against such third party (as for example where the loss
is on account of negligence of the third party). In both cases,
the assured can obtain reimbursement of the loss, from the
insurer. In the first case, neither the assured, nor the insurer can
E make any claim against any third party. But where the damage
is on account of negligence of a third party, the assured will
have the right to sue the wrongdoer for damages; and where
the assured has obtained the value of the goods lost from the
insurer in pursuance of the contract of insurance, the law of
F insurance recognizes as an equitable corollary of the principle
· of indemnity that the rights and remedies of the assured against
the wrong-doer stand transferred to and vested in the insurer.
The equitable assignment of the rights and remedies of the
assured in favour of the insurer, implied in a contract of
G indemnity, known as 'subrogation', is based on two basic
principles of equity : (a) No tort-feasor should escape liability
for his wrong; (b) No unjust enrichment for the injured, by
recovery of compensation for the same loss, from more than
one source. The doctrine of subrogation will thus enable the
H insurer, to step into the shoes of the assured, and enforce the
ECONOMIC TRANSPORT ORGANIZATION v. CHARAN 917
SPINNING MILLS (P) LTD. [R.V. RAVEENDRAN, J.]
rights and remedies available to the assured. A
12. The term 'subrogation' in the context of insurance, has
been defined in Black's Law Dictionary thus :
"The principle under which an insurer that has paid a loss
under an insurance policy is entitled to all the rights and
remedies belonging to the insured against a third party with
respect to any loss covered by the policy."
Black's Law Dictionary also extracts two general
definitions of 'subrogation'. The first is from Dan B. Dobb's C
Law of Contract (2nd Edn. - # 4.3 at 404) which reads thus:
"Subrogation simply means substitution of one person for
another; that is, one person is allowed to stand in the shoes
of another and assert that person's rights against the
0
defendant. Factually, the case arises because, for some
justifiable reason, the subrogation plaintiff has paid a debt
owed by the defendant."
The second is from Laurence P. Simpson's Handbook on iaw
of Suretyship (1950 Edn. Page 205) which reads thus : E
"Subrogation is equitable assignment. The right comes
into existence when the surety becomes obligated, and this
is important as affecting priorities, but such right of
subrogation does not become a cause of action until the
F
debt is duly paid. Subrogation entitles the surety to use any
remedy against the principal which the creditor could have
used, and in general to enjoy the benefit of any advantage
that the creditor had, such as a mortgage, lien, power to
confess judgment, to follow trust funds, to proceed against
a third person who has promised either the principal or the G
creditor to pay the debt."
'Right of Subrogation' is statutorily recognized and described
in section 79 of the Marine Insurance Act, 1963 as follows:
H
918 SUPREME COURT REPORTS [2010] 2 S.C.R.
A (1) Where the insurer pays for a total loss, either of the
whole, or in the case of goods of any apportionable part,
of the subject-matter insured, the thereupon becomes
entitled to take over the interest of the assured in whatever
may remain of the subject-matter so paid for, and he is
B thereby subrogated to all the rights and remedies of the
assured in and in respect of that subject-matter as from
the time of the casualty causing the loss.
(2) Subject to the foregoing provisions, where the insurer
pays for a partial loss, he acquires no title to the subject
c matter insured, or such part of it as may remain, but he is
thereupon subrogated to all rights and remedies of the
assured and in respect of the subject matter insured as
from the time of the casualty causing the loss, in so far as
the assured has been indemnified, according to this Act,
D by such payment for the loss".
Section 140 of Contract Act, 1872, deals with the principle of
subrogation with reference to rights of a Surety/Guarantor. It
reads:
E
"140. Rights of surety on payment or performance: Where
a guaranteed debt has become due, or default of the
principal - debtor to perform a guaranteed duty has been
taken place, the surety, upon payment or performance of
all that is liable for, is invested with all the rights which the
F creditor had against the principal - debtor."
The concept of subrogation was explained in the following
manner by Chancellor Boyd in National Fire Insurance Co. vs.
McLaren - 1886 (12) OR 682 :
G
"The doctrine of subrogation is a creature of equity not
founded on contract, but arising out of the relations of the
parties. In cases of insurance where a third party is liable
to make good the loss, the right of subrogation depends
upon and is regulated by the broad underlying principle of
H
ECONOMIC TRANSPORT ORGANIZATION v. CHARAN 919
SPINNING MILLS (P) LTD. [RV. RAVEENDRAN, J.]
.
securing full indemnity to the insured, on the one hand, and A
on the other of holding him accountable as trustee for any
advantage he may obtain over and above compensation
for his loss. Being an equitable rights, it partakes of all the
ordinary incidents of such rights, one of which is that in
administering relief the Court will regard not so much the B
form as the substance of the transaction. The primary
consideration is to see that the insured gets full
compensation for the property destroyed and the expenses
incurred in making good his loss. The next thing is to see
that he holds any surplus for the benefit of the insurance c
company."
In Banque Financiere de la Cite vs. Pare (Battersea) Ltd.
[1999 (1) A.C.221], the House of Lords explained the difference
between subrogatiC?ns arising from express or implied
agreement of the parties: D
" .... there was no dispute that the dc;>ctrine of subrog~tion
in insurance rests upon the common intention of the ,
parties and gives effect to the principle of indemnity
embodied in the contract. Furthermore, your Lordships E
drew attention to the fact that it is customary for the
assured, on payment of the loss, to provide the insurer with
a letter of subrogation, being no more nor less than an
express assignment of his rights of recovery against any
third party. Subrogation in this sense is a contractual F
arrangement for the transfer of rights against third parties
and is founded upon the common intention of the parties.
But the term is also used to describe an equitable remedy
to reverse or prevent unjust enrichment which is not based
upon any agreement or common intention of the party
enriched and the party deprived. The fact that contractual G
subrogation and subrogation to prevent unjust enrichment
both involve transfers of rights or something resembling
transfers of rights should not be allowed to obscure the fact
that one is dealing with radically different institutions. One H
920 SUPREME COURT REPORTS [2010] 2 S.C.R.
A is part of the law of contract and the other part of the law
of restitution."
13. An 'assignment' on the other hand, refers to a transfer
of a right by an instrument for consideration. When there is an
absolute assignment, the assignor is left with no title or interest
8
in the property or right, which is the subject matter of the
assignment. The difference between 'subrogation' and
'assignment' was stated in Insurance Law by MacGillivray &
Parkington (7th Edn.) thus :
c "Both subrogation and assignment permit one party to
enjoy the rights of another, but it is well established that
subrogation is not a species of assignment. Rights of
subrogation vest by operation of law rather than as the
product of express agreement. Whereas rights of
D subrogation can be enjoyed by the insurer as soon as
payment is made, as assignment requires an agreement
that the rights of the assured be assigned to the insurer.
The insurer cannot require the assured to assign to him
his rights against third parties as a condition of payment
E unless there is a special clause in the policy obliging the
assured to do so. This distinction is of some importance,
/
' '' since in certain circumstances an insurer might prefer to
take an assignment of an assured's rights rather than rely
upon his rights of subrogation. If, for example, there was
F any prospect of the insured being able to recover more
than his actual loss from a third party, an insurer, who had
taken an assignment of the assured's rights, would be able .
to recover the extra money for himself whereas an insurer
who was confined to rights of subrogation would have to
allow the assured to retain the excess.
G
Another distinction lies in the procedure of enforcing the
rights acquired oy virtue of the two doctrines. An insurer
exercising rights of subrogation against third parties must
do so in the name of the assured. An insurer who has
H taken a legal assignment of his assured's rights ,wnder
ECONOMIC TRANSPORT ORGANIZATION v. CHARAN 921
SPINNING MILLS (P) LTD. [RV. RAVEENDRAN, J.]
statue should proceed in his own name ... " A
The difference between subrogation and assignment was
highlighted by the Court of Appeals thus in James Nelson &
Sons Ltd. vs. Nelson Line (Liverpool) Ltd. (No. 1) - 1906 (2)
KB 217: B
"The way in which the underwriters come in is only by way
of subrogation to the rights of the assured. Their right is
not that of assignees of the cause of action; ..... Therefore,
they could only be entitled by way of subrogation to the
plaintiffs' rights. What is the nature of their right by way of C
subrogation? It is the right to stand in the shoes of the
persons whom they have indemnified, and to put in force
the right of action of those persons; but it remains the
plaintiffs' right of action, although the underwriters are
entitled to deduct from any sum recovered the amount to D ·
which they have indemnified the plaintiffs, and although
they may have provided the means of conducting the
action to a termination. It is not a case in which one person
is using the name of another merely as a nominal plaintiff
for the purpose of bringing an action in which he alone is ' E
really interested; for the plaintiffs here have real and-_
substantial interest of their own in the action."
The difference between assignment and subrogation was also
explained by the Madras High Court in Vasudeva Mudaliar vs.
F
Ca/edonian Insurance Co. - [AIR 1965 Mad. 159] thus :
"In other words arising out of the nature of a contract of
indemnity, the insurer, when he has indemnified the
assured, is subrogated to his rights and remedies against
third parties who have occasioned the loss. The right of G
the insurer to subrogation or to get into the shoes of the
assured as it were, need not necessarily flow from the
terms of the motor insurance policy, but is inherent in and
springs from the principles of indemnity.
H
922 SUPREME COURT REPORTS [2010] 2 S.C.R.
A '{Vhere,-therefore, an ir)_~urer is subrogated to the rights and
remedies of the assured, the former is to be more or less
in the :same p9sition ·as the assured in respect of third
parties an_d his claims against them founded on tortuous
liability in cases of motor accidents. But it should be noted
B that the fact that an insurer is subrogated to the rights and
rem·edies of the assured of the assured does not ipso jure
enable him to sue third parties in his own name. It will only
entitle the insurer to sue in the name of the assured, it
being an obligation of the assured to lend his name and
c assistance to such an action. By subrogation, the insl.!rer
gets no better rights or no different remedies than the
assured himself. Subrogation and its effect are therefore,
not to be mixed up with those of a transfer or any
assignment by the assured of his rights and remedies to
the insurer. An assignment or a transfer implies something
D
more than subrogation, and vests in the insurer the
assured's interest, rights and remedies in respect of the
subject matter and substance of the insurance. In such a
case, therefore, the insurer, by virtue of the transfer or
assignment in his favour, will be in a position to maintain
E a suit in his own name against third parties."
14. Subrogation, as an equitable assignment, is inherent,
incidental and collateral to a contract of indemnity, which occurs
automatically, when the insurer settles the claim under the policy,
F by reimbursing the entire loss suffered by the assured. It need
not be evidenced by any writing. But where the insurer does
not settle the claim of the assured fully, by reimbursing the entire
loss, there will be no equitable assignment of the claim enabling
the insurer to stand in the shoes of the assured, but only a right
G to recover from the assured, any amount remaining out of the
compensation recovered by the assured from the wrongdoer,
after the assured fully recovers his loss. To avoid any dispute
with the assured as to the right of subrogation and extent of its
· rights, the insurers usually reduce the terms of subrogation into
H writing in the form of a Letter of Subrogation which enables and
ECONOMIC TRANSPORT ORGANIZATION v. CHARAN 923
SPINNING MILLS (P) LTD. [RV. RAVEENDRAN, J.]
authorizes the _insurer to recover the amount settled and paid A
by the insurer; from the third party wrong-doer as a Subrogee..:
cum-Attorney. When the insurer obtains an instrument from the
assured on settlement of the claim, whether it will be a deed of
subrogation, or subrogation-cum-assignment, would depend
upon the intention of parties as evidenced by the wording of B
the document. The title or caption of the document, by itself, may
not be conclusive. It is possible that the document may be styled
as 'subrogation' but may contain in addition an assignment in
regard to the balance of the claim, in which event it will be a
deed of subrogation-cum-assignment. It may be a pure and c
simple subrogation but may inadvertently or by way of excessive
caution use words more appropriate to an assignment. If the
terms clearly show that the intention was to have only a
subrogation, use of the words "assign, transfer and abandon
in favour of' would in the context be construed as referring to
0
subrogation and nothing more.
15. We may, therefore, classify subrogations under three
broad categories: (i) subrogation by equitable assignment; (ii)
subrogation by contract; and (iii) subrogation-cum-assignment.
E
(15.1) In the first category, the subrogation is not evidenced
by any document; but is based on the insurance policy and the
receipt issued by the assured acknowledging the full settlement
of the claim relating to the loss. Where the insurer has
reimbursed the entire loss incurred by the assured, it can sue F
in the name of the assured for the amount paid by it to the
assured. But where the insurer has reimbursed only a part of
the loss, in settling the insurance claim, the insurer has to wait
for the assured to sue and recover compensation from the
wrongdoer; and when the assured recovers compensation, the G
assured is entitled to first appropriate the same towards the
balance of his loss (which was not received from the insurer)
so that he gets full reimbursement of his loss and the cost, if
any, incurred by him for such recovery. The insurer will be
H
;..924 SUPREME COURT REPORTS [2010) 2 S.C.R.
A entitled only to whatever balance remaining, for reimbursement
of what it paid to the assured.
(15.2) In the second category, the subrogation is evidenced
by an instrument. To avoid any dispute about the right to claim
reimbursement, or to settle the priority of inter-se claims or to
B
confirm the quantum of reimbursement in pursuance of the
subrogation, and to ensure co-operation by the assured in
suing the wrongdoer, the insurer usually obtains a letter of
subrogation in writing, specifying its rights vis-a-vis the assured.
The letter of subrogation is a contractual arrangement which
C crystallizes the rights of the insurer vis-a-vis the assignee. On
execution of a letter of subrogation, the insurer becomes
entitled to recover in terms of it, a sum not exceeding what was
paid by it under the contract of insurance by suing in the name
of the assured. Even where the insurer had settled only a part
D of the loss incurred by the assured, on recovery of the claim
from the wrongdoer, the insurer may, if the letter of subrogation
so authorizes, first appropriate what it had paid to the assured
and pay only the balance, if any, to the assured.
E (15.3) The third category is where the assured executes
a letter of subrogation-cum-assignment enabling the insurer
retain the entire amount recovered (even if it is more than what
was paid to the assured) and giving an option to sue in the name
of the assured or to sue in its own name.
F In all three types of subrogation, the insurer can sue the
wrongdoer in the name of the assured. This means that the
insurer requests the assured to file the suit/complaint and has
the option of joining as co-plaintiff. Alternatively the insurer can
obtain a special power of Attorney from the assured and then
G to sue the wrongdoer in the name of the assured as his
attorney.
The assured has no right to deny the equitable right of
subrogation of the insurer in accordance with law, even whether
H there is no writing to support it. But the assured whose claim
·1
ECONOMIC TRANSPORT ORGANIZATION v. CHARAN 925
SPINNING MILLS (P) LTD. [R.V. RAVEENDRAN, J.]
is settled by the insurer, only in respect of a part of the loss may A
insist that when compensation is recovered from the wrongdoer
he will first appropriate the same, to recover the balance of his
loss. The assured can also refuse to execute a subrogation-
cum-assignment which has the effect of taking away his right
to receive the balance of the loss. But once a subrogation is B
reduced to writing, the rights inter-se between the assured and
insurer will be regulated by the terms agreed, which is a matter
. of negotiation between the assured and insurer.
16. If a letter of subrogation containing terms of assignment C
is to be treated only as an assignment by ignoring the
subrogation~ there may be the danger of document itself
becoming invalid and unenforceable, having regard to the bar
contained in section 6 of the Transfer of Property Act, 1882 ('TP
Act' for short). Section 6 of Transport of Property Act, 1882,
provides that property of any kind may be transferred except D
as otherwise provided by that Act or by any other law for the
time being in force. Clause (e) of the said section provides that
mere right to sue cannot be transferred. Section 130 provides
the manner of transfer of actionable claims. Section 3 defines•
an 'actionable claim' as : (i) any debt (other than a debt secured E
by mortgage of immovable property or by hypothecation or
pledge of movable property) or (ii) any beneficial interest is
movable property not in the possession, either actual or
constructive of the claimant, which the civil courts recognizes
as affording grounds for relief. A 'debt' refers to an ascertained F
sum due from one person to another, as contrasted from
unliquidated damages and claims for compensation which
requires ascertainment/assessment by a Court or Tribunal
before it becomes due and payable. A transfer or assignment
of a mere right to sue for compensation will be invalid having G
regard to section 6(e) of the TP Act. But when a letter of
subrogation-cum-assignment is executed, the assignment is
interlinked with subrogation, and not being an assignment of a
mere right to sue, will be valid and enforceable.
H
926 SUPREME COURT REPORTS [2010] 2 S.C ..R.
'
A 17. The principles relating to subrogation can therefore be
summarized thus :
(i) Equitable right of subrogation arises when the insurer
settles the claim of the assured, for the entire loss. When
there is an equitable subrogation in favour of the insurer,
B
the insurer is allowed to stand in the shoes of the assured
and enforce the rights of the assured against the wrong-
doer.
(ii) Subrogation does not terminate nor puts an end to the
/c right of the assured to sue the wrong-doer and recover the
damages for the loss. Subro~ation only entitles the insurer
to receive back the amount paid to the assured, in terms
of the principles of subrogation.
D (iii) Where the assured executes a Letter of Subrogation,
reducing the terms of subrogation, the rights of the jnsurer
vis-a-vis the assured will be governed by the terms of the
Letter of Subrogation.
(iy) A subrogation enables the insurer to exercise the rights
E of the. assured against third parties in the name of the
assured. Consequently, any plaint, complaint or petition for
recovery of compensation can be filed in the name of the
assured, or by the assured represented by the insurer as
subrogee-cum-attorney, or by the assured and the insurer
F as co-plaintiffs or co-complainants.
(v) Where the assured executed a subrogation-cum-
assignment in favour of the insurer (as contrasted from a
subrogation), the assured is left with no right or interest.
Consequently, the assured will no longer be entitled to sue
G
the wrongdoer on its own account and for its own ·benefit.
But as the instrument is a subrogation-cum-assignment,
and not a mere assignment, the insurer has the choice of
suing in its own name, or in the name of the assured, if
the instrument so provides. The insured becomes entitled
ECONOMIC TRANSPORT ORGANIZATION v. CHARAN 927
SPINNING MILLS (P) LTD. [RV. RAVEENDRAN, J.]
to the entire amount recovered from the wrong-doer, that A
is, not only the amount that the insured had paid to the
assured, but also any amount received in excess of what
was paid by it to the assured, if the instrument so provides.
18. We may clarify the position with reference to the
8
following illustration: The loss to the assured is Rs.1,00,0001-
. The insurer settles the claim of the assured for Rs. 75,0001-
. The wrong-doer is sued for recovery of Rs.1,00,0001-.
. Where there is no letter of subrogation and insurer relies
on the equitable doctrine of subrogation (The suit is filed C
by the assured)
(i) If the suit filed for recovery of Rs.100,000/- is decreed
as prayed, and the said sum of Rs.1,00,000/- is recovered,
the assured would appropriate Rs. 25,000/- to recover the 0
entire loss of Rs. 100,000/- and the doctrine of subrogation
would enable the insurer to claim and receive the balance
of Rs.75,000
(ii) If the suit filed for recovery of Rs.100,000/- is decreed
as prayed for, but the assured is able to recover only E
Rs.50,000/- from the Judgment-Debtor (wrong-doer), the
assured will be entitled to appropriate Rs.25,000/- (which
is the shortfall to make up Rs.100,000/- being the loss) and
the insurer will be entitled to receive only the balance of
Rs. 25,000/- even though it had paid Rs. 75,000/- to the F
assured.
(iii) Where, the suit is filed for recovery of Rs.100,000/- but
the court assesses the loss actually suffered by the
assured as only Rs.75,000/- (as against the claim of the G
assured that the value of goods lost is Rs.100,000/-) and
then awards Rs.75,000/- plus costs, the insurer will be
entitled to claim and receive the entire amount of
Rs.75,000/- in view of the doctrine of subrogation.
H
928 SUPREME COURT REPORTS [2010] 2 S.C.R.
A Where the assured executes a letter of subrogation
entitling the insurer to recover Rs. 75,000/- (The suit is
filed in the name of the assured or jointly by the assured
and insurer).
(iv) If the suit is filed for recovery of Rs.1,00,000/-, and if
8
the court grants Rs.1,00,000/-, the insu~er will take
Rs.75,000/- and the assured will take Rs.25,000/-.
(v) If the insurer sues in the name of the assured for
Rs. 75,000/- and recovers Rs. 75,000/-, the insurer will
c retain the entire sum of Rs.75,000/- in pursuance of the
Letter of Subrogation, even if the assured has not
recovered the entire loss of Rs.1,00,000/-. If the assured
wants to recover the balance of the loss of Rs.25,000/- as
he had received only Rs. 75,000/- from the insurer, the
D assured should ensure that the claim is made against the
wrongdoer for the entire sum of Rs.100,000/- by bearing
the proportionate expense. Otherwise the insurer will sue
in the name of the assured for only for Rs. 75,000/-.
(vi) If the letter of subrogation executed by the assured
E
when the insurer settles the claim of the assured uses the
words that the "assured assigns, transfers and abandons
unto the insurer, the right to get Rs. 75,000/- from the
wrong-doer", the document will be a 'subrogation' in spite
of the use of words 'transfers, assigns and abandons'. This
F is because the insurer has settled the claim for Rs. 75,000/
- and the instrument merely entitles the insurer to receive
the said sum of Rs. 75,000/- which he had paid to the
assured, and nothing more.
G Where the assured executes a letter of subrogation-cum-
assignment for Rs.100,000/-
(vii) If the document executed by the assured in favour of
the insured provides that in consideration of the settlement
of the claim for Rs.75,000/-, the assured has transferred
H
ECONOMIC TRANSPORT ORGANIZATION v. CHARAN 929
SPINNING MILLS (P) LTD. [RV. RAVEENDRAN, J.]
and assigned by way of subrogation and assignment, the A
right to recover the entire value of the goods lost and retain
the entire amount without being accountable to the assured
for any excess recovered (over and above Rs.75,000/-)
and provides that the insurer may sue in the name of the
assured or sue in its own name without reference to the B
assured, the instrument is a subrogation-cum-assignment
and the insurer has the choice of either suing in the name
of the assured or in its own name.
Where the assured exectues a letters of assignment in C
favour of a third party to sue and recover from the carrier,
the value of the consignment.
(viii) If the assured, having received Rs. 75,000/- from the
insurer, executes an instrument in favour of a third party
(not being the insurer) assigning the right to sue and D
recover from the carrier, damages for loss of the
consignment, such a document will be an Assignment. The
assignee cannot file a complaint before the consumer fora,
as he is not a 'consumer'. Further, such a document being
a transfer of a mere right to sue, will be void and E
unenforceable, having regard to section 6(e) of Transfer
of Property Act, 1882. It is well settled that a right to sue
for unliquidated damages for breach of contract or for tort,
not being a right connected with the ownership of any
property, nor being a right to sue for a debt or actionable F
claim, is a mere right to sue and is incapable of being
transferred.
19. Whether the document executed by the assured in
favour of the insurer is a subrogation simpliciter, or a
subrogation-cum-assignment is relevant only in a dispute G
between the assured and the insurer. It may not be relevant for
deciding the maintainability of a complaint under the Act. If the
complaint is filed by the assured (who is the consumer), or by
the assured represented by the insurer as its attorney holder,
or by the assured and the insurer jointly as complainants, the H
930 SUPREME COURT REPORTS [2010] 2 S.C.R.
A complaint will be maintainable, if the presence of insurer is
explained as being a subrogee. Whether the amount claimed
is the total loss or only the amount for which the claim was
settled would make no difference for the maintainability of the
complaint, so long as the consumer is the complainant (either
B personally or represented by its attorney holder) or is a co-
complainant along with his subrogee. On the other hand, if the
assured (who is the consumer) is not the complainant, and the
insurer alone files the complaint in its own name, the complaint
will not be maintainable, as the insurer is not a 'consumer', nor
c a person who answers the definition of 'complainant' under the
Act. The fact that it seeks to recover from the wrongdoer
(service provider) only the amount paid to the assured and not
any amount in excess of what was paid to the assured will also
not make any difference, if the assured - consignor is not the
complainant or co-complainant. The complaint will not be
0
maintainable unless the requirements of the Act are fulfilled. The
remedy under the Act being summary in nature, once the
consumer is the complainant or is a co-complainant, it will not
be necessary for the Consumer Forum to probe the exact
E nature of relationship between the consumer (assured) and the
insurer, in a complaint against the service provider.
20. In this context, it is necessary to remember that the
nature of examination of a document may differ with reference
to the context in which it is examined. If a document is examined
F to find out whether adequate stamp duty has been paid under
the Stamp Act, it will not be necessary to examine whether it
is validly executed or whether it is fraudulent or forged. On the
other hana, if a document is being examined in a criminal case
in the context of whether an offence of forgery has been
G committed, the question for examination will be whether it is
forged or fraudulent, and the issue of stamp duty or registration
will be irrelevant. But if the document is sought to be produced
and relied upon in a civil suit, in addition to the question whether
it is genuine, or forged, the question whether it is compulsorily
H registrable or not, and the question whether it bears the proper
ECONOMIC TRANSPORT ORGANIZATION v. CHARAN 931 ' J
SPINNING MILLS (P) LTD. [R.V. RAVEENDRAN, J.]
stamp duty, will become relevant. If the document is examined A
in the context of a dispute between the parties to the document,
the nature of examination will be to find out that rights and
obligation of one party vis-a-vis the other party. If in a summary
proceedings by a consumer against a service provider, the
insurer is added as a co-complainant or if the insurer B
represents the consumer as a power of attorney, there is no
need to examine the nature of rights inter-se between the
consumer and his insurer. When the complaint is by the
consignor - consumer, with or without the insurer as a co-
complainant, the service provider cannot require the consumer c
forum to consider the nature of relationship between the
assured and the insurer or the nature and true purport of the
document produced as a letter of subrogation. A wrong-doer
cannot sidetrack the issue before the consumer forum. Once
the 'consumer', that is the assured, is the complainant, the
0
.complaint wiii be maintainable subject to fulfillment of the
requirements of the Act.
21. At this juncture we should also take note of the fact that
insurance companies, statutory corporations and banks use
standardized forms to cover all types of situations and E
circumstances and several of the clauses in such forms may
be wholly inapplicable to the transaction intended to be covered
by the document. Necessarily such redundant or inapplicable
clauses should be ignored while trying examining the document
and make sense out of it. To demonstrate this position, we F
extract below the letter of subrogation-cum-special power of
attorney dated 15.2.1996 executed by the assured in this case,
by highlighting the irrelevant clauses by bold letters:
"Letter of Subrogation & Special Power of Attorney"
Tu G
M/s National insurance Co. Ltd.,
Dindigal
In consideration of your paying to us a sum of Rs.
4,47,436.00 (Rupees Four Lakhs Forty Seven Thousand
H
932 SUPREME COURT REPORTS [2010] 2 S.C.R.
A Four Hundred & Thirty Six only) in respect of loss/damage
to the under mentioned goods and/or duly payable thereon
insured under policy no. 500703/21/24/95/007 issued by
National Insurance Co. Ltd., we hereby assign, transfer and
abandon to you all our actionable rights, title and interest
B in and to the said goods and proceeds thereof (to the
extent provided by law) and all rights and remedies against
Railway Administration and/or sea carriers and/or agents
of Sea Carriers and/or Port Authorities and/or Customs
Authorities and/or persons or persons whosoever is liable
c in respect thereof.
We hereby guarantee that we are the persons entitled to
enforce the terms, of contracts of transportations set forth
in the bills of lading and/or railway receipt and/or any
other documents of title evidencing the contract of
D transportation or bailment relating to land covering the
property described below for transportation or bailment and
agree to indemnify you for all and any losses and
consequences should it turn out that we are not the
persons to enforce the terms of the contract.
E
And we hereby subrogate to you that rights and remedies
that we have in consequence of or arising from loss/
damage to the under mentioned goods and we further
hereby gra'nt to you full power to take and use all lawful
ways and means to demand, recover and to receive the
F
said loss/damage, customs penalty or refund of customs
duty and all and every debt from whom it may concern.
And we also hereby authorize you to use our name in any
action or proceedings that you may bring either in your own
G name or in our name in relation to any of the matters
hereby assigned, transferred and/or abandoned to you and
we undertake for ourselves to assist and concur in any
matters or proceedings which you may deem expedient
or necessary in any such actions or proceedings and to
H execute all deeds, assignments and or documents
ECONOMIC TRANSPORT ORGANIZATION v. CHARAN 933
SPINNING MILLS (P) LTD. [R.V. RAVEENDRAN, J.]
including any and all pleadings and releases which may A
be necessary therefor and generally to assist therein by
all means in our power.
We hereby authorize you to file a suit or suits in courts of
law against the Union of India owning and representing 8
Indian Railways, the Sea Carriers Charterers Agents of
Sea Carriers and/or Port Authorities or any other carriers
and or bailees and/or person or persons, firm or firms,
corporation or corporation, to recover the claim moneys
of the aforesaid claim or claims and for the said purposes C
to join us as a co-plaintiffs if you so intend. We further
hereby give you authority to sing, declare, verify and affirm
and execute jointly and severally in our name and on our
behalf, plaints, affidavits, vakalatnamas, petitions and such
other applications and/or notices and documents as may
be found necessary for the commencement or continuation D
of proceedings to recover the claim moneys.
We further undertake if called upon by you to do so
ourselves to institute any such action or proceedings that
you may direct on your behalf; it being understood that you E
are to indemnify us and any other persons whose names
may necessarily be used, against any costs, charges or
expenses which may be incurred in respect of any action
or proceeding that may be taken by virtue of this
agreement. F
The payment received for herein is accepted with the
understanding that the said payment shall not enure to the
benefit of any carrier or bailees under the provision of any
contract of carriage or otherwise; that in making the said
payment the underwriter does not waive any rights of G
subrogation or otherwise against any carrier or bailee and
acceptance of this receipt shall not prejudice or take away
any rights or remedies which the said underwriter would
otherwise have by virtue of such payment.
H
934 SUPREME COURT REPORTS [2010] 2 S.C.R.
A We further agree that any moneys collected from any
carrier port authorities or any persons or persons, shall be
your property, and if received in the first instance by the
undersigned we undertake to make over to you
immediately the amount so received.
B
We hereby further agree that in event of the loss packages
and/or contents thereof subsequently being traced, we
undertake to accept and take delivery of the same and the
claim shall then be readjusted on the correct basis of the
then loss/damage and in the event of any refund providing
c to be due to the underwriter, we undertake on demand to
make such refund to you.
?
We hereby appoint you, your officers and agents and
there successors severally our agents and attorneys-in-fact
D with irrevocable power to collect any and all such claims
and to begin, prosecute, compromise, arbitrate or withdraw
either in our own name or in your name but at your expense
any and all legal proceedings which you may deem
necessary to enforce such claim or claims including
E proceedings before any international tribunal and to
execute in our name any documents which maybe
necessary to carry into effect the purpose of .this
agreement, and for that purpose we further authorize you
to do all or any of the acts, deeds and things herein
F mentioned, for us, on our behalf and in our name.
xxxxx
(emphasis supplied)
The use of the words "we hereby assign, transfer and abandon
G to you all our actionable rights, title and interest" in the
document, is in regard to rights and remedies against (1)
railway administration (2) sea carriers (3) agents of sea carriers
(4) port authorities (5) customs authorities and (6) persons
whomsoever is liable in respect thereof. Even though, the matter
H re'lates to carriage of goods by road, the claims or remedies
ECONOMIC TRANSPORT ORGANIZATION v. CHARAN 935
SPINNING MILLS (P) LTD. [RV. RAVEENDRAN, J.]
against a road carrier are not even mentioned. Excluding the A
irrelevant clauses, the document continues to be a letter of
subrogation.
22. A document should be transaction-specific. Or at least
an effort should be made to delete or exclude inapplicable or 8
irrelevant clauses. But where a large number of documentation
is required to be done by officers not-conversant with the
nuances of drafting, use of standard forms with several choices
or alternative provisions is found necessary. The person
preparing the document is required to delete the terms/clauses C
which are inapplicable. But that is seldom done. The result is
that the documents executed in standard forms will have several
irrelevant clauses. Computerisation and large legal
departments should have enabled insurance companies, banks
and financial institutions to (i) improve their documentation
processes and omit unnecessary and repetitive clauses; (ii) D
avoid incorporation of other documents by vague references;
and (iii) discontinue pasting or annexing of slips. But that is
seldom done. If documents are clear, specific and self-
contained, disputes and litigations will be considerably reduced.
E
23. Let us now consider the decision in Oberai. The
assured therein had executed two documents in favour of the
insurer, on settlement of the claim. The first was a letter of
subrogation and the second was a special power of attorney.
The letter of subrogation stated as follows : F
"In consideration of your paying to us the sum of Rs.64, 137
only in full settlement of our claim for non-delivery/shortage
and damage under Policy No. 2142140400015 issued by
you all on the under-mentioned goods, we hereby assign,
transfer and abandon to you all our rights against the G
Railway Administration, road transport carriers or other
persons whatsoever, caused or arising by reason of the
said damage or loss and grant you full power to take and
use all lawful ways and means in your own name and
otherwise at your risk and expense to recover the claim H
936 SUPREME COURT REPORTS [2010] 2 S.C.R.
A for the said damage or loss and we hereby subrogate to
you the same rights as we have in consequence of or
arising from the said loss or damage.
And we hereby undertake and agree to make and execute
at your expense all such further deeds, assignments and
B
documents and to render you such assistance as you may
reasonable require for the purpose of carrying out this
agreement."
The special power of attorney authorized the insurer to file a
C suit in court against the Railway Administration, for recovery of
the claim on behalf of the assured, in the name of the assured,
ar.d to give a valid discharge and effectual receipt therefor. On
the basis of the said documents, the complaint was initially filed
by the insurer. Subsequently, the assured was added as a party.
D Though the claim of the assured therein was settled by the
insurer for Rs.64, 137/- as against the consignment value of ·
Rs.93,925/-, the insurer appears to have sued for the full value
of Rs.93,925/- which was awarded by the District Forum and
affirmed· by the National Commission. This Court held that
E where there is a subrogation simpliciter, the insurer can sue
the wrong-doer in the name of the assured, and where there is
an assignment, the insurer is entitled to sue the wrong-doer in
his own name. This Court held that the document executed by
the assured though titled as 'letter of subrogation' was, in fact,
F an assignment by the assured of its rights in favour of the
insurer. This Court held that the use of the following words in
the document amounted to an absolute assignment, as
contrasted from subrogation:
"(i) We hereby assign, transfer and abandon to you all our
G rights against the Railway Administration, road transport
carriers or other persons whatsoever, caused or arising
by reason of the said damage or loss and grant you full
. power to take and use all lawful ways and means in your
own name and otherwise at your risk and expense to
H recover the claim for the said damage or loss.
ECONOMIC TRANSPORT ORGANIZATION v. CHARAN 937
SPINNING MILLS (P) LTD. [R.V. RAVEENDRAN, J.]
(ii) We hereby subrogate to you the same rights as we A
have in consequence of or arising from the said loss or
damage."
(23.1) There is no doubt that the first portion which stated
that all rights were assigned, transferred and abandoned in B
favour of the insurer and also empowered the insurer to sue in
its own name, if read in isolation would amount to an
assignment. But if those words are read with the other recitals
and the words "in consideration of your paying to us the sum
of Rs.64, 137l- only in full settlement of our claim for non- C
delivery/shortage and damage, under policy issued by you .... "
make it clear that it was a subrogation-cum-assignment.
Further, the second operative portion which states that "we
hereby subrogate to you the same rights as we have in
consequence of or arising from the said loss or damage" are
not words of assignment. When the words used are : ''we hereby D
subrogate to you" and not "we hereby transfer or assign in your
favour", having regard to the settled meaning of "subrogate",
· the said words could not operate as an absolute assignment.-
but only as an subrogation. The genesis of the document is
. subrogation. The inclusion of an assignment is an additional E
right given to the insurer. The document did not cease to be a
subrogation by reason of enlargement of subrogation by
granting such additional right. In para 22 of the judgment, this
Court negatived the contention that the letter of subrogation and
the special power of Attorney should be read together and if F
so read, the document would be a subrogation. But the special
power of attorney when read with the term in the letter of
subrogation, "we hereby subrogate to you the same rights as
we have in consequence of or arising from the said loss of
damage" will certainly show that the document was intended G ·
to be a subrogation also and not a mere assignment. With
great respect to the learned Judges who decideq Oberai, it has
to be held that Oberai was not correctly decide(j, ·as-1t he.Id a
1
'subrogation-cum-assignment' as a mere ·a~signment'. It
ignored the fact that, shorn of the cover and protection of H
938 SUPREME COURT REPORTS [2010] 2 S.C.R.
A subrogation, the document, if read as a simple assignment
would fall foul of section 6(e) of Transfer of Property Act and
thus would be unenforceable. But the ultimate decision in
Oberai may be correct as the complaint was filed by the
insurer, in its own name and on its own behalf making a claim
B for the entire value of the goods, in excess of what was paid to
the assured. Though the assured was belatedly impleaded as
a co-complainant, the nature and contents of the-complaint was
not apparently changed, and continued to be one by the insurer
as assignee. On those peculiar facts, the finding that the
c complaint under the Act by the insurer (who was not a consumer)
was not maintainable, was justified.
(23.2) We may also refer to the frequent misconstruction
of para 23 of the decision in Oberai by some carriers. The said
para does not mean that when the consignment is received by
D the carrier from the consignor and put it in the course of
transportation, the carrier has provided the service and
thereafter either ceases to be a service provider or ceases to
be responsible for delivery of the goods, and that consequently,
the consignor ceases to be a 'consumer'. All that para 23 of
E Oberai meant was that in a contract for carriage of goods
between the consignor (assured) and the carrier, if the
consignor assigns the right to claim damages to an assignee,
after the goods are lost or damaged, the assignee cannot claim
to be a "consumer'' under the Act. It impliedly meant that if the
F assignment had b~en done before the loss or damage to the
goods, then the assignment would have been in regard to
'property' and not a mere right to sue, and the assignee as
consignee would be entitled to sue the carrier. Be that as it may.
24. We therefore answer the questions raised as follows:
G
(a) The insurer, as subrogee, can file a complaint under
the Act either in the name of the assured (as his attorney
holder) or in the joint names of the assured and the insurer
for recovery of the amount due from the service provider.
H
ECONOMIC TRANSPORT ORGANIZATION v. CHARAN 939
SPINNING MILLS (P) LTD. [R.V. RAVEENDRAN, J.]
The insurer may also request the assured to sue the wrong A
doer (service provider).
(b) Even if the letter of subrogation executed by the
assured in favour of the insurer contains in addition to the
words of subrogation, any words of assignment, the B
complaint would be maintainable so long as the complaint
is in the name of the assured and insurer figures in the
complaint only a~ an attorney holder or subrogee of the
assured.
(c) The insurer cannot in its own name maintain a c
complaint before a consumer forum under the Act, even if
its right is traced to the terms of a Letter of subrogation-
cum-assignment executed by the assured.
(d) Oberai is not good law insofar as it construes a Letter D
of subrogation-cum-assignment, as a pure and simple
assignment. But to the extent it holds that an insurer alone
cannot file a complaint under the Act, the decision is
/
correct.
25. We may also notice that section 2(d) of Act was E
amended by Amendment Act 62 of 2002 with effect from
15.3.2003, by adding the words "but does not include a person
who avails of such services for any commercial purpose" in the
definition of 'consumer'. After the said amendment, if the service
of the carrier had been availed for any commercial purpose, F
then the person availing the service will not be a 'consumer'
and consequently, complaints will not be maintainable in such
cases. But the said amendment will not apply to complaints filed
before the amendment.
G
Re : Question (d)
26. Section 14(1)(d) of the Act provides that the Forum
under the Act can direct payment of compensation awarded by
it to the consumer for any loss or injury suffered by the consumer
due to the negligence of the opposite party. This, according to H
940 SUPREME COURT REPORTS [2010] 2 S.C.R.
A the appellant, makes it mandatory for the complainant to
establish negligence on the part of the opposite party, i.e. the
carrier. It is further contended that presumption of negligence
under Section 9 of the Carriers Act, 1865 (which provides that
in any suit brought against a common carrier for the loss,
s damage or non-delivery of the goods entrusted to him for
carriage, it shall not be necessary for the plaintiff to prove that
such loss, damage or non-delivery of goods was owing to the
negligence or criminal act of the carrier, his servants and
agents) is applicable only to a civil suit, and not to a complaint
c under the Act which specifically contemplates establishment of
negligence by evidence. It is submitted that in this case the
compensation has been awarded even though no evidence
,was led by the complainants about negligence of the driver of
appellant.
D 27. It is no doubt true that Section 14( 1)(d) of the Act
contemplates award of compensation to the consumer for any
loss suffered by consumer due to the negligence of the
opposite party (Carrier). Section 9 of Carriers Act does not lay
down a preposition that a carrier will be liable even if there was
E no negligence on its part. On the other hand, it merely raises a
presumption that when there is loss or damage or non-delivery
of goods entrusted to a carrier, such loss, damage or non-
delivery was due to the negligence of the carrier, its servant and
agents. Thus wliere the consignor establishes loss or damage
F or non-delivery of goods, it is deemed that negligence on the
part of the carrier is established. The carrier may avoid liability
if it establishes that the loss, damage or non-delivery was due
to an act of God or circumstances beyond its control. Section
14(1)(d) of the Act does not operate to relieve the carrier
G against the presumption of negligence created under Section
9 of the Carriers Act.
28. The contention of appellant that the presumption under
section 9 of the Carriers Act is available only in suits filed
before civil courts and not in other civil proceedings under other
H
ECONOMIC TRANSPORT ORGANIZATION v. CHARAN 941
SPINNING MILLS (P) LTD. [R.V. RAVEENDRAN, J.]
Acts, is not tenable. This Court in Patel Roadways Ltd. v. Bir/a A
Yamaha Ltd. [2000 (4) SCC 91] has observed:
"The principle regarding the liability of a carrier contained
in S.9 of Carriers Act namely, that the liability of a carrier
is that of an insurer and that in a case of loss or damage
8
to goods entrusted to the carrier the plaintiff need not prove
negligence, are applicable in a proceeding before the
Consumer Forum. The term "suit" has not been defined in
Carriers Act nor it is provided in the said Act that the term
'suit' will have the same meaning as in Civil PC. Therefore; C
the term 'suit' has to be understood in its ordinary
dictionary meaning. In that sense, term 'suit' is a generic
term taking within its sweep all proceedings initiated by a
party for valuation of a right vested in him under law. It is
true that a proceeding before Consumer Forum is
ordinarily a summary proceeding and in an appropriate D .
case where the commission feels that the issues raised
are too contentious to be decided in summary
proceedings it may refer parties to Civil Court. That,
however, does not mean that proceedings before the
Consumer Forum is to be decided by ignoring the express E
statutory provision of Carriers Act in a proceeding in which
a claim is made against a common carrier. A proceeding
before the Consumer Forum comes within the sweep of
term 'suit."
F
29. Again in Economic Transport Organization vs.
Dharward District Khadi Gramodyog Sangh - 2000 (5) SCC
78, this Court reiterated the principle stated in Patel Roadways
and added the. following :
"Even assuming that section 9 of the Carriers Act, 1865 G
does not apply to the cases before the Consumer Fora
under Consumer Protection Act, the principle of common
law above-mentioned gets attracted to all these cases
coming up before the Consumer Fora. Section 14(1 )(d) of
the Consumer Protection Act has to be understood in that H
942 SUPREME COURT REPORTS [2010] 2- S.C.R.
.. .
A light and the burden of proof gets shifted to the carriers.
. by the application of the legal presumption ~nder the
common law. Section 14(1)(d) has to be understood in that
manner. The complainant can discharge the iditial onus, .
even if it is laid on him under section 14(1}(d)··of the
8 Consumer Protection Act, by. re·lying on section 9'of the
Carrier Act. It will, therefore; be for the caffier to· prove·
·absence. of negligence." · · ·
· We reiterate the said settled position and reject the contention.
of the appellant that the presumption under section 9 of Carriers
C Act is not available in a proceeding under the Consumer
Protection Act and that therefore, in the absence of.proof of
negligence, it is not liable to compensate the respondents for
the loss. · ·
D Conclusion
30. The loss of consignment by the assured and
settlement of claim by the insurer by paying Rs.4,47,436/- is
established by evidence. Having regard to the presumption
E regarding negligence under section 9 of Carriers Act, it was
not necessary for the complainants to prove further that the loss/
damage was due to the negligence of the appellant or its
driver. The presumption regarding negligence was not rebutted.
Therefor.e, the District Forum was justified in allowing the
complaint brought by the assured (first respondent)
F represented by the insurer and the insurer for recovery of
Rs.447,436. The said order was affirmed by the State Forum
and the National Forum. We find no reason to interfere with the
same. The appeal is, therefore, dismissed.
G N.J. Appeal dismissed.
;.
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