2010 (2) TMI 1264 - SC - Indian Laws

Term Subrogation' - Principles of Subrogation - Claimed compensation - damage to the consignment was due to the negligence on the part of the appellant and its servants - settlement of the claim and the letter of subrogation-cum- special power of attorney executed by the Assured - distinction between assignment' and subrogation '- first respondent ( Assured' or the consignor') is a manufacturer of the cotton yarn - policy of insurance from the second respondent (National Insurance Co. Ltd, as the Insurer') - covering transit risks in respect of cotton yarn sent by it to various consignees through rail or road against theft, pilferage, non-delivery and/or damage - HELD THAT - 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 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. The difference between assignment and subrogation was also explained by the Madras High Court in Vasudeva Mudaliar vs. Caledonian Insurance Co. 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 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 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 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 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 subrogation and nothing more. If a letter of subrogation containing terms of assignment 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 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. Principles relating to Subrogation can 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, 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 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 Subrogation, reducing the terms of subrogation, the rights of the insurer vis- -vis the assured will be governed by the terms of the Letter of Subrogation. (iv) A subrogation enables the insurer to exercise the 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 and the insurer 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 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 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. (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 assignment? - 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. The insurer may also request the assured to sue the wrong doer (service provider). (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 assured as co- complainants? - 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 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) 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- 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? - The insurer cannot in its own name maintain a 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) Whether relief could be granted in a complaint against the carrier/service provider, in the absence of any proof of negligence? - Oberai is not good law insofar as it construes a 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. We may also notice that section 2(d) of Act was 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, 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. 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 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 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 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 under Section 9 of the Carriers Act. 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 Acts, is not tenable - We reiterate the said settled position and reject the contention of the appellant that the presumption under section 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 not liable to compensate the respondents for the loss. Conclusion The loss of consignment by the assured and settlement of claim by the insurer by paying ₹ 4,47,436/- is established by evidence. Having 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. 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 ₹ 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.

Summary

Issues Involved:
1. Whether a letter of subrogation containing terms of assignment ceases to be subrogation and becomes an assignment.
2. Whether an insurer as subrogee can lodge a complaint under the Consumer Protection Act.
3. Whether an insurer as assignee can file a complaint under the Consumer Protection Act.
4. Whether relief could be granted in a complaint against the carrier/service provider in the absence of any proof of negligence.

Issue-wise Detailed Analysis:

1. Letter of Subrogation and Assignment:
The court examined whether a letter of subrogation containing terms of assignment ceases to be subrogation and becomes an assignment. It was clarified that subrogation is an equitable assignment inherent in a contract of indemnity, occurring automatically when the insurer settles the claim. The document's title or caption is not conclusive; the intention of the parties as evidenced by the wording is crucial. The court classified subrogation into three categories: subrogation by equitable assignment, subrogation by contract, and subrogation-cum-assignment. It was held that even if a letter of subrogation contains terms of assignment, it remains a subrogation if the primary intention is to subrogate.

2. Insurer as Subrogee Lodging a Complaint:
The court held that an insurer, as subrogee, can file a complaint under the Consumer Protection Act either in the name of the assured (as attorney holder) or in the joint names of the assured and the insurer. The insurer may also request the assured to sue the wrongdoer. The complaint is maintainable as long as the assured is the complainant or co-complainant, and the insurer figures in the complaint only as an attorney holder or subrogee.

3. Insurer as Assignee Filing a Complaint:
The court ruled that the insurer cannot in its own name maintain a complaint before a consumer forum under the Act, even if its right is traced to a letter of subrogation-cum-assignment executed by the assured. The complaint must be in the name of the assured or jointly with the insurer. The decision in Oberai Forwarding Agency was overruled to the extent it construed a letter of subrogation-cum-assignment as a pure and simple assignment.

4. Proof of Negligence:
The court addressed whether relief could be granted in the absence of proof of negligence. Section 14(1)(d) of the Consumer Protection Act contemplates awarding compensation for loss suffered due to negligence of the carrier. Section 9 of the Carriers Act raises a presumption of negligence when there is loss, damage, or non-delivery of goods, applicable even in proceedings before consumer forums. The appellant's contention that the presumption under section 9 of the Carriers Act is available only in civil suits was rejected. The court reiterated that the principle regarding the liability of a carrier under section 9 of the Carriers Act applies to proceedings before consumer forums. The complainant can discharge the initial onus by relying on section 9 of the Carriers Act, shifting the burden of proof to the carrier.

Conclusion:
The loss of consignment and settlement of the claim by the insurer was established by evidence. The presumption of negligence under section 9 of the Carriers Act was not rebutted. The District Forum's order allowing the complaint was affirmed by the State Forum and the National Forum. The appeal was dismissed.