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TMI Blog2010 (2) TMI 1264X X X X Extracts X X X X X X X X Extracts X X X X ..... ter 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rely 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. Conclus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,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 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 ₹ 447,436/- with interest at 12% per annum, for deficiency in 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 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 ₹ 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 basis of the subrogation. The District Forum held that the failure to deliver the consignment in sound condition was a defici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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 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 `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 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 assignee of the claim. We extract below the relevant portion of the said judgment: 17. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as 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. 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 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. 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even though the original consumer as well as the Insurance Company to whom the rights stood subrogated and assigned were the complainants. 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, 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 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 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, the services have already been rendered and tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was held that the consignor could still sue notwithstanding the fact that compensation was paid by the insurance 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 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 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 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 implead the consignor. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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. 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. There the assignment was obtained after the accident and after the Insurance Company paid the money to the consignor. In our view, the above contention of the respondent are substantial and a case is made out for reconsideration of Oberai Forwarding Agency. 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 Forward ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid any partly promised, or under any system of deferred payment and 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 mentioned person ....... Deficiency means any fault, imperfection, short-coming, 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 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 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, the assured had received from the insurer, the value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 Law of Suretyship (1950 Edn. Page 205) which reads thus : 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 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 creditor to pay the debt. `Right of Subrogation' is statutorily recognized and described in section 79 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g good his loss. The next thing is to see that he holds any surplus for the benefit of the insurance company. In Banque Financiere de la Cite vs. Parc (Battersea) Ltd. [1999 (1) A.C.221], the House of Lords explained the difference between subrogations arising from express or implied agreement of the parties: ....there was no dispute that the doctrine of subrogation 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 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 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 subrogation and subrogation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 (2) KB 217 : 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 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 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 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. Caledonian Insurance Co. - [AIR 1965 Mad. 159] thus : In othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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. 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 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 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 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 reduced to writing, the rights inter-se between the assured and insurer will be regulated by the terms agreed, which is a matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ghts 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he had received only ₹ 75,000/- from the insurer, the assured should ensure that the claim is made against the wrongdoer for the entire sum of ₹ 100,000/- by bearing the proportionate expense. Otherwise the insurer will sue in the name of the assured for only for ₹ 75,000/-. (vi) If the letter of subrogation executed by the assured 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 ₹ 75,000/- from the wrong-doer , the document will be a `subrogation' in spite of the use of words `transfers, assigns and abandons'. This is because the insurer has settled the claim for ₹ 75,000/- and the instrument merely entitles the insurer to receive the said sum of ₹ 75,000/- which he had paid to the assured, and nothing more. Where the assured executes a letter of subrogation-cum- assignment for ₹ 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 ₹ 75,000/-, the assured has transferred and assigned by way of subrogation and assignmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the insurer alone files the complaint in its own name, the complaint will not be maintainable, as the insurer is not a `consumer', nor 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 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 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 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 execute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration of your paying to us a sum of ₹ 4,47,436.00 (Rupees Four Lakhs Forty Seven Thousand 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 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 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 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yment the underwriter does not waive any rights of 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. 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. 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 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 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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,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 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. 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 reasonable require for the purpose of carrying out this agreement. The special power of attorney authorized the insurer to file a suit in court against the Railway Administration, for recovery of the claim on behalf of the assured, in the name of the assured, and to give a valid discharge and effectual receipt therefor. On the basis of the said documents, the complain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... signment, 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. 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 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 to be a subrogation also and not a mere assignment. With great respect to the learned Judges who decided Oberai, it has to be held that Oberai was not correctly decided, as it held 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 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. 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 oppo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s or damage 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, 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 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 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. 29. Again in Economic Transport Organization vs. Dharward District Khadi Gramodyog Sangh - 2000 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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