After considering the Case Law and the distinction between “subrogation” and “assignment”, Supreme Court of India came to the conclusion that the letter styled as “subrogation” was in fact assignment of the rights by the insured and, therefore, the insurer was not a ‘consumer’ within the meaning of the Consumer Protection Act, 1986 and, therefore, not entitled to maintain the complaint. It was held that:-
“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 the first respondent full power to take lawful means to recover the 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 amount paid by the first respondent to the second respondent. Thirdly, 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 assignment in favour of the first respondent.”
“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 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 'consumer' within the meaning of the Consumer Protection Act and was, therefore, not entitled to maintain the complaint.”
Supreme Court of India held that in the case of subrogation, Rights of Subrogation vests by operation of law rather than as the product of express agreement. Right of Subrogation can be enjoyed by the insurer as soon as payment is made, whereas an assignment requires an agreement that the rights of the assured be assigned to the insurer. In the case of subrogation, the assignee can recover whatever amount has been paid by him to the insurer whereas in the case of assignment, he can recover more than the actual loss from the insurer/third party.
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI
REVISION PETITION NO. 3027 OF 2003
BEFORE: -
HON ’BLE MR. B.K. TAIMNI, MEMBER
BHARAT DIESELS … PETITIONER
VERSUS
PRATAP SINGH AND ANOTHER … RESP ONDENTS
Dated;28.07.2009
PRONOUNCED ON : 29.07.2009
Briefly stated, the facts of the case are:-
Complainants - Pratap Singh and Sukhveer Singh -respondent nos. 1 and 2 herein, purchased a Mahendra Tractor bearing registration no. UP-10C-1578 on 18.11.1997 for Rs.2,43,000/- from the petitioner. The tractor was duly insured by the complainants with Oriental Insurance Company Limited (which was Complainant no.3 before the District Forum) for a sum of Rs.2,40,000/-. Complainants took the tractor for servicing to the petitioner premises on 01.06.1999. According to the complainants/respondents, tractor was stolen whereas according to the petitioner, tractor had been taken away by a person who had come with the complainant after the service was over. Complainants lodged their claim with the Oriental Insurance Company Limited who appointed a Surveyor. The Surveyor assessed the loss at Rs.1,90,000/- against the total insured value of Rs.2,40,000/- Complainants issued a letter of subrogation in favour of the Oriental Insurance Company Limited to the following effect:-
“LETTER OF SUBROGATION
I hereby acknowledge receipt of the sum of Rs.1,90,000/- (Rs. one lakh ninety thousand) which you have paid to me and I/we accept in full and final settlement of my/our claim in respect of our loss on 06.01.1999 under Policy No.31/99/01392 for Rs.2,40,000/-.
Description of interest Tractor’s Comprehensive Insurance Policy.
I/we have place on record that by virtue of such payment the underwriters concerned become subrogated to all my/our rights and remedies in and in respect matter insured in accordance with the laws governing the Contract Insurance. I/we also record that they have authority to use my names to the extent necessary effectively to exercise all or any of such rights & remedies, that I/we will furnish them with any assistance they may reasonably require of me when exercising such rights & remedies, whilst on their party, they will indemnify me/us against liability for costs, charges & expenses arising in connection with any proceedings which they may take in my/our name/s in the exercise of such rights & remedies.”
After the receipt of sum of Rs.1,90,000/- as aforementioned, the complainants/respondents along with Oriental Insurance Company Limited, filed the present Complaint before the District Forum seeking direction to the petitioner to pay Rs.2,43,000/- being the value of the tractor with 18% interest. Rs.50,000/- were claimed towards damages and loss of earning.
District Forum, after taking into consideration the pleadings as well as the evidences produced by the parties, allowed the complaint and directed the petitioner to either deliver tractor no. UP-10C-1578, which had been stolen from its premises or to pay its value, i.e., Rs.2,43,000/- along with interest @ 10% from the date of filing of the complaint, i.e., 16.11.1999. Rs. 20,000/- were awarded as damages and Rs.5,000/- as costs.
Being aggrieved by the Order passed by the District Forum, petitioner filed an Appeal before the State Consumer Disputes Redressal Commission, Dehradun, Uttaranchal (hereinafter referred to as ‘the State Commission’ for short), which has been dismissed by the impugned Order with the modification that the complaint filed by the Oriental Insurance Company Limited was not maintainable and the complaint to that extent would be deemed to be dismissed but the complaint filed by the complainants/respondent nos. 1 and 2 was held to be maintainable and the Order of the District Forum was upheld with regard to the rights of the complainants/respondent nos. 1 and 2.
Being aggrieved by the Order of the State Commission, the present Revision Petition has been filed.
Shri Sukumar Pattjoshi, learned Counsel appearing for the petitioner contends that respondent nos. 1 and 2 had issued a letter of subrogation in favour of the Oriental Insurance Company Limited by virtue of which a sum of Rs.1,90,000/- was payable and transferred all their rights and remedies in respect of the goods insured for an insured value of Rs.2,40,000/-. That the complainants/respondents were not entitled to a claim any amount whatsoever in respect of subject matter of insurance from anybody including the petitioner, firstly, because, such a claim, if allowed, would amount to unjust enrichment. Secondly, after having subrogated their entire rights and remedies, they did not retain any right to further make claims from the third party because such a claim would render the subrogation in favour of the Insurance Company superfluous.
As against this, learned Counsel appearing for the respondents/complainants contended that the complainants are entitled to institute an action for full amount for the loss of the tractor. That the respondents could not recover the entire loss suffered by them and, therefore, are entitled to recover the loss from the petitioner. That the petitioner could not be absolved of their liability to pay the full amount.
Counsel for the parties have been heard at length.
State Commission has non-sueited the Oriental Insurance Company Limited relying upon the Judgments of Hon’ble the Supreme Court of India in Oberai Forwarding Agency v. New India Assurance Company Limited and Another reported in (2000) 2 SCC 407;Navjyoti Investment And Dealers Limited v. National Insurance Company Limited and Another reported in III (2001) CPJ 8 (SC)and Savani Roadlines v. Sundaram Textiles Limited and Another reported in III (2001) CPJ 8 (SC) wherein it was held that the Insurance Company, not being a consumer, cannot maintain a complaint under the Consumer Protection Act, 1986 (hereinafter referred to as ‘the Act’ for short).
In the present case, the Insurance Company has not filed the Appeal against the impugned Order challenging the dismissal of the complaint and the same has attained finality against it. Claim of respondent nos.1 and 2 has been upheld on the ground that the complainants had received amount less than the actual price of tractor from the Insurance Company.
Questions which fell for consideration before Hon’ble the Supreme Court of India in Oberai Forwarding Agency’s case (supra) was as to whether the Insurance Company was subrogated to the rights of the claimant consignors of the goods with respect to the lost consignment or whether the Insurance Company who was the assignee of the rights in respect of the rights of insured thereof; and, if the latter, whether it was a ‘consumer’ within the meaning of the Consumer Protection Act 1986 entitled to maintain a complaint thereunder?
The facts of the case were that the insured, through his Agent, hired two trucks from a Firm of Bareilly to transport broken rice to a place in Assam
After considering the Case Law and the distinction between “subrogation” and “assignment”, Supreme Court of India came to the conclusion that the letter styled as “subrogation” was in fact assignment of the rights by the insured and, therefore, the insurer was not a ‘consumer’ within the meaning of the Consumer Protection Act, 1986 and, therefore, not entitled to maintain the complaint. It was held that:-
“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 the first respondent full power to take lawful means to recover the 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 amount paid by the first respondent to the second respondent. Thirdly, 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 assignment in favour of the first respondent.”
“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 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 'consumer' within the meaning of the Consumer Protection Act and was, therefore, not entitled to maintain the complaint.”
Supreme Court of India held that in the case of subrogation, Rights of Subrogation vests by operation of law rather than as the product of express agreement. Right of Subrogation can be enjoyed by the insurer as soon as payment is made, whereas an assignment requires an agreement that the rights of the assured be assigned to the insurer. In the case of subrogation, the assignee can recover whatever amount has been paid by him to the insurer whereas in the case of assignment, he can recover more than the actual loss from the insurer/third party.
Another distinction drawn was that in the case of subrogation, insurer exercising Right of Subrogation against third parties must do so in the name of the assured whereas in the case of assignment he can proceed to enforce the right in his own name. It was held that in literal sense, “subrogation” is the substitution of rights of one party to another. Subrogation confers upon the insurer the right to receive benefits of such rights as the assured has against the third party with regard to the loss to the extent that Insurer has indemnified the loss and made it good. Whereas in the case of “assignment” he can recover more than the actual loss suffered from the third party.
Supreme Court relied upon the standard textbook Insurance Law by MacGillivray and Parkington (7th Edition) in which distinction between “subrogation” and “assignment” has been explained to mean as under: -
“1131. Difference between subrogation and assignment.-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 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 can-not require the assured to assign to him his rights against third parties as a condition of payment 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 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.
1132. Another distinction lies in the procedure of enforcing the rights acquired by 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 taken a legal assignment of his assured's rights under statute should proceed in his own name....”
In the present case, a perusal of the document executed by the insured (reproduced in paragraph 2 above) in favour of the insurer was a letter of subrogation and not assignment. Nowhere in the letter, word ‘assignment’ has been used. They had not assigned their entire set of rights in favour of the insurer. There is not even a hint in the letter of subrogation that the petitioner intended to transfer the entire set of rights in favour of the insurer. In view of this, though the complaint was maintainable on behalf of the insurer but since insurer has not filed the Appeal thereby letting the Order passed by the State Commission against it to attain finality, nothing can be done. Insofar as the insured are concerned, they can certainly proceed to recover the amount from the petitioner but the same shall have to be restricted to the extent of the balance amount which remained unrecovered otherwise it would amount to undue enrichment specially in view of the fact that the complaint filed by the insurer has been dismissed by the State Commission which has attained finality. Complainants/respondents have already secured Rs.1,90,000/- from the insurer. The value of the tractor was Rs.2,43,000/-. Giving a depreciation of Rs.13,000/-, the complainants/respondents would be entitled to recover the sum of Rs.40,000/- from the petitioner and not the entire amount as they cannot unduly enrich themselves by getting double payment, i.e., from the insurer as well as from the petitioner, towards the loss of the tractor.
The Revision Petition is partly allowed. The Order of the State Commission is modified. Complainants/respondents would be entitled to recover only Rs.40,000/- from the petitioner and not the entire value of the tractor, i.e., Rs.2,43,000/-. Parties shall bear their own costs.
. . . . . . . . . . . . . . . .
(ASHOK BHAN J.)
PRESIDENT
. . . . . . . . . . . . . . . .
(B.K. TAIMNI)
MEMBER
REVISION PETITION NO. 3027 OF 2003
(From the Order dated 01.04.2003 in Appeal No. 344 of 2002 of State Consumer Disputes Redressal Commission, Dehradun, Uttaranchal)
BHARAT DIESELS … PETITIONER
VERSUS
PRATAP SINGH AND ANOTHER … RESP ONDENTS
Draft Order in the above matter is sent herewith for your kind perusal. If approved, the same may be listed for pronouncement.
(ASHOK BHAN J.)
President
28.07.2009
Hon’ble Mr. B.K. Taimni,
Member
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