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PETITIONER:

OBERAI FORWARDING AGENCY

Vs.

RESPONDENT:

NEW INDIA ASSURANCE CO. LTD. & ANR.

DATE OF JUDGMENT: 01/02/2000

BENCH:

S.P.Bharucha, N.S.Hegde, S.S.M.Quadri

JUDGMENT:

BHARUCHA, J.

The facts are set out only in so far as they are

relevant to the two issues in this appeal, namely, whether

the first respondent insurance company was subrogated to the

rights of the second respondent consignor in respect of the

lost consignment or whether it was the assignee of the

rights of the second respondent in respect 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 second respondent, through its agent, hired two

trucks from M/s. Bhasin Goods Carriers of Bareilly to

transport broken rice to Barpeta, Assam. According to the

appellant, it was asked by M/s. Bhasin Goods Carriers and

the second respondents agent only to settle the freight for

the consignment, which it did. The trucks loaded with the

consignment did not reach their destination and the

consignment was lost.

The second respondent made a claim for the value of

the consignment upon the first respondent, who had insured

it, in the sum of Rs.93,925.55. The claim was settled by

the first respondent in the sum of Rs.64,137/- , and that

sum was paid to the second respondent.

Consequent upon the claim being settled, the second

respondent executed in favour of the first respondent, a

Letter of Subrogation on 15th June, 1992. It stated :

In consideration of your paying to us the sum of Rs.64137/-

only say Rupees Sixty four thousand one hundred and thirty

seven only in full settlement of our claim for non-

delivery/shortage & damage under policy No.2142140400015

Cert. No./decl. No.269240001/54 & 55 issued by you all on

the undermentioned goods, 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 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 we hereby subrogate to you the same rights as we have in

consequence of or arising from the said loss or damage.

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And we hereby undertake and agree to make and execute

at your expense all such further deeds, assignments and

documents and to render you such assistance as you may

reasonably require for the purpose of carrying out this

agreement.

On the same day the second respondent also executed in

favour of the first respondent a Special Power of Attorney,

inter alia for the following purpose : To file suit in the

court of law against the Railways Adm. if necessary for the

recovery of the claim moneys for the afore said claim, on

our behalf and in our name and to give valid discharges and

effectful receipt thereto.

On 9th September, 1992 the first respondent filed

against the appellant a complaint under the Consumer

Protection Act in respect of the loss of the consignment

wherein it stated that the second respondent had

assigned/transferred their rights to claim the amount from

the O.P. in favour of the complainant by executing Letter

of Subrogation and power of attorney in it favour. .

The complainant stands subrogated to the rights of M/s.

M.S. Industries as consumer and is consumer under the law

and the purview of the C.P. Act.. The appellant in its

written statement contended that the first respondent was

not a consumer and had no right to file the complaint and

that the provisions of the Consumer Protection Act were not

attracted. The complaint was thereafter amended and the

second respondent was added as a co-complainant.

The District Forum, Shahjahanpur, in which the

complaint was filed, allowed it and directed the appellant

to pay to the respondents the sum of Rs.98,924.55 and

interest. The appellant preferred an appeal before the

State Forum. The appeal was dismissed, but the amount of

compensation was reduced to Rs.69,137/-. Against the order

of the State Commission, a Revision Petition was filed

before the National Consumer Dispute Redressal Commission.

The same was dismissed and the appellant was directed to pay

to the respondents the sum of Rs.98,924.55 as compensation.

The appellant impugns the order of the National Consumer

Disputes Redressal Commission by special leave.

Learned counsel for the appellant submitted that the

document quoted above, though styled Letter of

Subrogation, was an assignment by the second respondent of

its rights to the first respondent. Upon such assignment,

the assignor second respondent had no right left. And the

assignee first respondent was not a consumer. For the

first respondent, on the other hand, it was submitted that

the document was indeed a letter of subrogation and that,

therefore, the first respondent and the second respondent

were entitled to maintain the complaint.

Our attention was drawn by learned counsel for the

appellant to the judgments of this Court in Union of India

vs. Sri Sarada Mills Ltd., 1972 (2) SCC 877, and New India

Assurance Co. Ltd. vs. G.N. Sainani, 1997 (6) SCC 383;

the judgments of the Madras and Andhra Pradesh High Courts

in Vasudeva Mudaliar vs. Caledonian Insurance Co. & Anr.,

AIR 1965 Madras 159, and United India Fire and General

Insurance Co. Ltd. vs. Pelaniappa Transport Carriers &

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Anr., AIR 1986 Andhra Pradesh 32; and to the judgments of

the National Consumer Disputes Refressal Commission in M/s.

Green Transport Company vs. New India Assurance Company

Ltd., 1992 (2) CPJ 349, and Transport Corporation of India

Ltd. vs. Davangera Cotton Mills Ltd. & Ors., 1998 (2) CPJ

16.

Before we proceed to consider the judgments and

arguments, it is convenient to set out the relevant

provisions of the Consumer Protection Act. Under Section

2(b) a consumer can be a complainant. A consumer, under

the terms of Section 2(d)(ii), is, inter alia: any person

who hires or avails of any services for a consideration

which has been paid or promised or partly paid and partly

promised, or under any system of deferred payment and

includes any beneficiary of such services other than the

person who hires or avails of the service 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 mentioned person;

Section 3 states:

The provisions of the Consumer Protection Act are in

addition to and not in the derogation of the provisions of

any other law for the time being in force.

In the case of Vasudeva Mudaliar (ibid) a learned

Single Judge of the Madras High Court said : (4) A

contract of motor insurance, like marine or accident

insurance, is, in essence, one of indemnity. The

underwriter, for consideration, guarantees the assured

compensation against loss or risks, the limits of the

guarantee against accident or loss or damage suffered,

totally or partially, being subject to the maximum

stipulated in the contract of insurance. Conversely, the

rights of the assured are not to profit out of the bargain.

It is implied in the very nature of the contract of

indemnity that the indemnifier is entitled to re-coupe or

minimise the damages he is obliged to pay the assured, by

ways and means the assured himself could resort to, in order

to reimburse himself against loss caused to him by third

party negligence. Such a right of the insurer is, of

course, conditional upon his having already indemnified the

assured. 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. This

right of 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. This is as a

matter of law relating to indemnity, and the basis of the

right is justice, equity and good conscience, namely, the

indemnifier should be in a position to reduce the extent of

his liability within limits.

(5) Where, therefore, an insurer is subrogated to the

rights and remedies of the assured, the former is to be more

or less in the same position as the assured in respect of

third parties and his claims against them founded on

tortious liability in cases of motor accidents. But it

should be noted that the fact that an insurer is subrogated

to the rights and remedies of the assured does not ipso jure

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enable him to sue third parties in his own name. It will

only entitle the insurer to sue in the name of assured, it

being an obligation of the assured to lend his name and

assistance to such an action. By subrogation, the insurer

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 an assignment

by the assured of his rights and remedies to the insurer.

An assignment or a transfer implies something more than

subrogation, and vests in the insurer the assureds

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 a

suit in his own name against third parties. .

This Court in the case of Union of India vs. Sri

Sarada Mills Ltd. (ibid) was hearing an appeal by the

Railways in a suit for damages for bales of cotton which had

been damaged in transit. All the three learned Judges who

heard it were agreed that subrogation did not confer any

independent right on underwriters to maintain in their own

name and without reference to the persons assured an action

for damage to the things insured. The majority took the

view that in the case before them the insurance company and

the consignor mill had proceeded on the basis that the

former was only subrogated to the rights of the latter and

the insurance company had allowed the respondent mill to

sue; the cause of action of the mill against the Railways

did not perish on giving the letter of subrogation. Mathew,

J., dissenting, referred to the finding of the High Court

that there had been an assignment of a mere right to sue by

the respondent mill to the insurance company and, therefore,

in his view, the question was whether what was assigned was

a mere right to sue or something which the law of insurance

recognised as assignable. The reason why a mere right to

sue could not be assigned was that such an assignment

offended the rule of champerty and maintenance. The learned

Judge concluded that the assignment had conveyed to the

insurance company the entire right in respect of the subject

matter of the insurance, including the right of the insured

to sue in its own name, and that, after the assignment, the

respondent mill had no cause of action to institute the suit

against the Railways for the recovery of damages.

The case of United India Fire and General Insurance

Co. Ltd. (ibid) related to a document in its favour which

recited that it had paid to the consignor compensation for

the loss of the consigned goods and the consignor hereby

assigned and transferred to you all our rights title and

interest in respect of the said goods and all rights and

claims against any person or persons in respect thereof.

The Andhra Pradesh High Court held that the appellant

insurance company had been assigned the right, title and

interest of the consignor and the suit by it for recovery of

damages was maintainable, though the consignor was not

impleaded as a co-plaintiff.

In New India Assurance Co. Ltd. vs. G.N. Sainani

(ibid) this Court was examining a complaint filed by the

appellant insurance company under the Consumer Protection

Act. The question that arose was whether the assignee could

be said to be a beneficiary so as to be able to make the

complaint. What had been assigned was found to be the

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amount of the loss that was suffered by the assured on

account of short landing of the concerned goods, meaning

thereby that what had been assigned was the right to recover

the loss. It was merely the assignment of a right to sue

for the loss on account of short landing. It was,

therefore, difficult to see how it could be said that the

assignee was the beneficiary of any service. While the

assignee might have the right to recover the loss from the

insurer by filing a suit in a civil court, he could not

avail of the remedy under the Consumer Protection Act

because he was not a consumer.

The Consumer Protection Forum in the case of M/s.

Green Transport Company (ibid) analysed the definition of

consumer under the Consumer Protection Act and found that

it was only the person who had hired a service for

consideration or any other person availing of the benefit of

such service with his approval who could be regarded as a

consumer thereunder. In the case before it, the

respondent insurance company was the complainant. It had

insured a consignment which had been lost. The fact that it

had acquired rights of subrogation against the transporter

did not improve its position so far as proceedings under the

Consumer Protection Act were concerned. Neither the

subrogation nor the deed of transfer of the right of action

nor the Special Power of Attorney clothed it with the legal

status of a consumer so as to entitle it to invoke the

special jurisdiction of and maintain the complaint under the

Consumer Protection Act. In the Transport Corporation of

India Ltd. case (ibid) the insurance company was not the

sole complainant. The consignor and the consignee of the

lost consignment were parties to the complaint. It was held

that the transporter was liable to indemnify them for the

loss of goods. Though the claim had been settled by the

insurance company and the consignor had issued a letter of

subrogation, that did not effect the rights of the consignor

and consignee to claim the value of the goods from the

transporter. Accordingly, the complaint was maintainable.

In its literal sense, subrogation is the substitution

of one person for another. The doctrine of subrogation

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 for the

loss, but it must do so in the name of the assured.

The distinction between subrogation and assignment is

explained in the standard text book on Insurance Law by

MacGillivray & Parkington (Seventh Edition).

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, an

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 unless there is a

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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 assureds 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 assureds 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 assureds

rights under statute should proceed in his own name ..

With the distinction between subrogation and

assignment in view, let us examine the Letter of Subrogation

executed by the second respondent in favour of the first

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 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 in consequence

of or arising from the said loss or damage.

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 respondents 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.

The second clause, undoubtedly, used the word

subrogate, but it conferred upon the first respondent the

same rights that the second respondent had in consequence

of or arising from the said loss or damage, which meant

that the transfer was not limited to the quantum paid by the

first respondent to the second respondent but encompassed

all the compensation for the loss. Even by the second

clause, therefore, there was an assignment in favour of the

first respondent.

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 that the first respondent was not an assignee of the

second respondents rights but was merely subrogated to

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them. The terms of the Letter of Subrogation are clear.

They cannot be read differently in the light of another,

though contemporaneous, document.

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.

By reason of the transfer and assignment of all the

rights of the second respondent in the first respondents

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 did not, therefore, make the complaint

maintainable.

In the premises, the appeal is allowed. The judgment

and order under appeal is set aside. The complaint filed by

the respondents is dismissed.