Carrying such passengers may be a breach of the policy, but it cannot be said to be such a fundamental breach as to bring the insurance policy to an end and to terminate the insurance policy.= The driver, on a cold wintery night, gave lift to some persons standing on the road. It was a humanitarian gesture. It cannot be said to be such a breach that it nullifies the policy. No doubt, these passengers turned against the driver and stole the truck, but this, the driver could not have foreseen. In the cases cited above, such claims where there is breach of policy, have been treated to be non-standard claims and have been directed to be settled at 75%. – As far as the second ground is concerned, we fail to understand how the arbitration proceedings between the financer and the insurer, relating to recovery of the loan amount, can in any way, negate the rights of the insured against the insurance company.

 

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REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO(S). 21552 OF 2017
(@SPECIAL LEAVE PETITION (C) NO. 34605 OF 2015)
MANJEET SINGH …APPELLANT (S)
Versus
NATIONAL INSURANCE COMPANY
LTD. & ANR. …RESPONDENT(S)

J U D G M E N T
Deepak Gupta, J.
Leave granted.
2. None has put in appearance on behalf of the respondent
no. 2 despite service. Hence, the matter has been heard in the
absence of the learned counsel for the respondent no. 2.
3. Briefly stated the facts of the case are that the appellant
Manjeet Singh purchased a second-hand Tata open truck
under a Hire Purchase agreement dated 13.10.2003 for a sum
of Rs. 8,57,000/- from Respondent No.2. The vehicle was
hypothecated in favour of Respondent No.2. It was insured for
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a value of Rs.7,28,000/- and the insurance policy was valid
from 25.09.2004 to 24.09.2005. On 12.12.2004, the vehicle
was being driven by Sanjay Kumar on the National Highway
near Karnal. Some persons gave a signal to the driver to stop
the vehicle. After he stopped, they requested the driver to give
them lift up to Yamuna Nagar since no other mode of transport
was available. Since it was a cold wintery night, the driver
gave a lift to these persons. After a little while, one of the
passengers requested the driver to stop the truck on the
pretext that he had to answer the call of nature. When the
truck driver stopped the truck, the three passengers assaulted
the driver, tied his hands and legs with a rope and threw him
in a nearby field and fled away with the vehicle.
4. An FIR was lodged at Police Station, Ladwa on
13.12.2004 and the respondent no. 2, finance company was
intimated about the theft. The complainant had also given a
letter of authority to the finance company to negotiate and
settle the claim with the insurance company. However, no
settlement was arrived at and the claim was not settled and
repudiated vide letter dated 11.11.2005 on the ground of
breach of terms of the policy. The owner-complainant filed a
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claim petition before the District Consumer Disputes Redressal
Forum (for short ‘the District Forum’) alleging that the
insurance company was liable to compensate him for the loss
caused to him by the theft of the truck. The main defence
taken by the respondent no. 2, insurance company was that
the driver of the vehicle, by giving a lift to the passengers, had
violated the terms of the policy and, as such, there was breach
of policy and the insurance company was not liable. This
ground found favour with the District Forum. The appeal filed
by the claimant before the State Consumer Disputes Redressal
Commission (for short ‘the State Commission’) was rejected
and so was the revision filed before the National Consumer
Disputes Redressal Commission (for short ‘the National
Commission’). The District Forum also rejected the claim on
the ground that the arbitration proceedings had been initiated
by the Respondent No. 2, finance company against the
complainant and they were at the final stage.
5. As far as the first ground is concerned, we are of the
considered opinion, that the District Forum had not properly
appreciated the scope and ambit of the policy. The violation of
the condition should be such a fundamental breach so that
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the claimant cannot claim any amount whatsoever. As far as
the violation in carrying passengers is concerned, this has
consistently been held not to be a fundamental breach and, in
this behalf, we may make reference to the judgments of this
Court in the case of National Insurance Co. Ltd. v. Swaran
Singh, (2004) 3 SCC 297, National Insurance Co. Ltd. v.
Nitin Khandelwal, (2008) 11 SCC 259, Lakhmi Chand v.
Reliance General Insurance, (2016) 3 SCC 100 and B.V.
Nagaraju v. Oriental Insurance Co. Ltd., (1996) 4 SCC 647.
6. In Lakhmi Chand case (supra), this Court held that to
avoid its liability, the insurance company must not only
establish the defence that the policy has been breached, but
must also show that the breach of the policy is so fundamental
in nature that it brings the contract to an end.
7. In the present case, the appellant who is the owner, was
not at fault. His driver gave a lift to some passengers.
Carrying such passengers may be a breach of the policy, but it
cannot be said to be such a fundamental breach as to bring
the insurance policy to an end and to terminate the insurance
policy. The driver, on a cold wintery night, gave lift to some
persons standing on the road. It was a humanitarian gesture.
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It cannot be said to be such a breach that it nullifies the
policy. No doubt, these passengers turned against the driver
and stole the truck, but this, the driver could not have
foreseen. In the cases cited above, such claims where there is
breach of policy, have been treated to be non-standard claims
and have been directed to be settled at 75%.
8. As far as the second ground is concerned, we fail to
understand how the arbitration proceedings between the
financer and the insurer, relating to recovery of the loan
amount, can in any way, negate the rights of the insured
against the insurance company.

9. In view of the above discussion, we allow the appeal, set
aside the orders of the courts below and direct the respondent
no.1-insurance company to pay 75% of the insured amount of
Rs.7,28,000/- along with interest at the rate of 9% per annum
from the date of filing the claim petition till the deposit of the
amount. In addition, the insurance company shall also pay
another sum of Rs.1,00,000/- as compensation. Since the
financer is also a party to the petition, the amount shall be
deposited before the District Forum, and in case the claim of
the financer has not been settled in terms of the arbitration
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award, then the deposited amount shall first be used to pay
the awarded amount and the balance, if any, shall be paid to
the appellant. The appeal is disposed of in the aforesaid
terms. Pending application(s), if any, also stand(s) disposed of.
….……………………..J.
(MADAN B. LOKUR)
.….…………………….J.
(DEEPAK GUPTA)
New Delhi
December 08, 2017