# 2 S.C.R. 887 ECONOMIC TRANSPORT ORGANIZATION v. M/S. CHARAN SPINNING MILLS (P) LTD. AND ANR

- **Citation:** [2010] 2 S.C.R. 887
- **Court:** Supreme Court of India
- **Decided:** 2010-02-17
- **Case number:** Civil Appeal No. 5611 of 1999
- **Bench:** K.G. Balakrishnan, R.V. Raveendran, D.K. Jain, P. Sathasivam, J.M. Panchal
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/2-s-c-r-887-economic-transport-organization-v-m-s-charan-spinning-mills-p-ltd-26641
- **Pages:** 56

## Headnote

Consumer Protection Act, 1986:
A
B
c
ss. 2(1 )(g) and 14(1 )(d) - Deficiency in service ,-
Complaint - Maintainability of - Contract of insurance -
Consignment of goods - Damaged in transit - Compensation
paid by insurer to consignor/assured - Execution of letter of
subrogation-cum-special power of attorney by consignor in
D
favour of insurer - Claim of compensation by consignor and
insurer against carrier - Allowed by fora below - On appeal,
held: Insurer, as subrogee, can file a complaint under the Act
either in the name of assured (as his attorney holder) or in
joint names of assured and insurer for recovery of amount
due from the service provider - It can request the assured to
E
sue the wrong doer - Insurer cannot in its own name maintain
a complaint, even if its right is traced to the terms of a Letter
of Subrogation-cum-Assignment - On addition of words of
assignment to Jetter of subrogation, the complaint would be
maintainable so long as it is in the name of assured and
F
insurer figures in the complaint only as attorney holder or
subrogee of assured -
Document whether subrogation
simpliciter or subrogation-cum-assignment is not relevant for
deciding the maintainability of a complaint - On facts,
presumption regarding negligence u/s. 9 was not rebutted -
G
Loss of eonsignment by assured and settlement of claim by
insurer established by evidence - Thus, order of fora below
not interfered with - Carriers Act, 1865 - s. 9.
887
H
888
SUPREME COURT REPORTS
[201 O] 2 S.C.R.
A
Insurance - Difference between 'subrogation' and
'assignment' - Held: Equitable assignment of rights and
remedies of assured in favour of insurer, implied in a contract
of indemnity, is known as 'subrogation' -
It occurs
automatically, when insurer settles the claim under the policy,
B by reimbursing the entire loss suffered by assured - It need
not be evidenced by any writing - Assignment refers to transfer
of a right by instrument for consideration - When there is
absolute assignment, assignor is left with no title or interest
in the property or right, which is the subject matter of
c assignment.
Subrogation - Principles of - Explained.
Subrogation -
Three categories - Subrogation by
equitable assignment; subrogation by contract; and
D subrogation-cum-assignment - Explained.
Insurance contract - Settlement of claim - Execution of
document by assured in favour of insurer, deed of
Subrogation simpliciter or Subrogation-cum-Assignment -
E Held: Depends upon the intention of parties as evidenced by
the wording of document - Title or caption of document, by
itself, may not be conclusive - If intention was to have only a
subrogation, use of words "assign, transfer and abandon in
favour of' would in the context be construed as referring to
F
subrogation only.
Reconsideration of the decision in *Oberai Forwarding
Agency v. New India Assurance Co. Ltd. - Held: Oberai's
case is not good law insofar as it construes a Letter of
Subrogation-cum-Assignment, as a pure and simple
G assignment - But to the extent it holds that an insurer alone
cannot file a complaint under the Act, the decision was correct.
s. 2(d) ( as amended by Amendment Act 62 of 2002) -
Addition of words 'but does not include a person who avails
H of such services for any commercial purpose' in the definition
ECONOMIC TRANSPORT ORGANIZATION v. CHARAN
889
SPINNING MILLS (P) LTD.
of 'consumer' - Applicability of amendment to complaint filed A
before the amendment - Held: Not applicable.
Transfer of Property Act, 1882:
s. 6 -
Letter of subrogation containing terms of
assignment - Held: Cannot be treated only as an assignment B
by ignoring the subrogation, otherwise document itself
becomes invalid and unenforceable, having regard to the bar
contained in s. 6 - But when letter of subrogation-cumassignment is executed, assignment is interlinked with
subrogation, and not being an assignment of a mere right to C
sue, will be valid and enforceable.
Words and Phrases:
'Subrogation and 'Assignment'- Meanin

## Text

_Characters 0–39,906 of 108,715. This is a partial read: ask again with offset=39906 for what follows._

[201 O] 2 S.C.R. 887
ECONOMIC TRANSPORT ORGANIZATION
v.
M/S. CHARAN SPINNING MILLS (P) LTD. AND ANR
(Civil Appeal No. 5611 of 1999)
FEBRUARY 17, 2010
[K.G. BALAKRISHNAN, CJI., R.V. RAVEENDRAN, D.K.
JAIN, P. SATHASIVAM AND J.M. PANCHAL, JJ.]
Consumer Protection Act, 1986:
A
B
c
ss. 2(1 )(g) and 14(1 )(d) - Deficiency in service ,-
Complaint - Maintainability of - Contract of insurance -
Consignment of goods - Damaged in transit - Compensation
paid by insurer to consignor/assured - Execution of letter of
subrogation-cum-special power of attorney by consignor in
D
favour of insurer - Claim of compensation by consignor and
insurer against carrier - Allowed by fora below - On appeal,
held: Insurer, as subrogee, can file a complaint under the Act
either in the name of assured (as his attorney holder) or in
joint names of assured and insurer for recovery of amount
due from the service provider - It can request the assured to
E
sue the wrong doer - Insurer cannot in its own name maintain
a complaint, even if its right is traced to the terms of a Letter
of Subrogation-cum-Assignment - On addition of words of
assignment to Jetter of subrogation, the complaint would be
maintainable so long as it is in the name of assured and
F
insurer figures in the complaint only as attorney holder or
subrogee of assured -
Document whether subrogation
simpliciter or subrogation-cum-assignment is not relevant for
deciding the maintainability of a complaint - On facts,
presumption regarding negligence u/s. 9 was not rebutted -
G
Loss of eonsignment by assured and settlement of claim by
insurer established by evidence - Thus, order of fora below
not interfered with - Carriers Act, 1865 - s. 9.
887
H
888
SUPREME COURT REPORTS
[201 O] 2 S.C.R.
A
Insurance - Difference between 'subrogation' and
'assignment' - Held: Equitable assignment of rights and
remedies of assured in favour of insurer, implied in a contract
of indemnity, is known as 'subrogation' -
It occurs
automatically, when insurer settles the claim under the policy,
B by reimbursing the entire loss suffered by assured - It need
not be evidenced by any writing - Assignment refers to transfer
of a right by instrument for consideration - When there is
absolute assignment, assignor is left with no title or interest
in the property or right, which is the subject matter of
c assignment.
Subrogation - Principles of - Explained.
Subrogation -
Three categories - Subrogation by
equitable assignment; subrogation by contract; and
D subrogation-cum-assignment - Explained.
Insurance contract - Settlement of claim - Execution of
document by assured in favour of insurer, deed of
Subrogation simpliciter or Subrogation-cum-Assignment -
E Held: Depends upon the intention of parties as evidenced by
the wording of document - Title or caption of document, by
itself, may not be conclusive - If intention was to have only a
subrogation, use of words "assign, transfer and abandon in
favour of' would in the context be construed as referring to
F
subrogation only.
Reconsideration of the decision in *Oberai Forwarding
Agency v. New India Assurance Co. Ltd. - Held: Oberai's
case is not good law insofar as it construes a Letter of
Subrogation-cum-Assignment, as a pure and simple
G assignment - But to the extent it holds that an insurer alone
cannot file a complaint under the Act, the decision was correct.
s. 2(d) ( as amended by Amendment Act 62 of 2002) -
Addition of words 'but does not include a person who avails
H of such services for any commercial purpose' in the definition
ECONOMIC TRANSPORT ORGANIZATION v. CHARAN
889
SPINNING MILLS (P) LTD.
of 'consumer' - Applicability of amendment to complaint filed A
before the amendment - Held: Not applicable.
Transfer of Property Act, 1882:
s. 6 -
Letter of subrogation containing terms of
assignment - Held: Cannot be treated only as an assignment B
by ignoring the subrogation, otherwise document itself
becomes invalid and unenforceable, having regard to the bar
contained in s. 6 - But when letter of subrogation-cumassignment is executed, assignment is interlinked with
subrogation, and not being an assignment of a mere right to C
sue, will be valid and enforceable.
Words and Phrases:
'Subrogation and 'Assignment'- Meaning of.
The first respondent-assured/consignor entrusted
consignment of goods for transportation to the appellantD
ca rrier. The said consignment was insured with the
second respondent-insurer covering the transit risk. The
goods were damaged in an accident. The insurer settled
E
the claim of the assured. On receiving the payment, the
first respondent executed a Letter of Subrogation-cumS pec ia I Power of Attorney in favour of the second
respondent. Respondent no. 1 and 2 filed complaint
before the District Consumer Forum claiming
F
compensation. The District Forum allowed the complaint
and the same was upheld by the Fora below. Hence the
present appeal.
The present appeal was referred to a larger bench for · G
reconsideration of the decision in *Oberai Forwarding
Agency v. New India Assurance Co. Ltd. case, which in turn
referred the matter to the present Constitution Bench.
The questions which arose for consideration are:
H
890
A
B
c
D
E
F
SUPREME COURT REPORTS
[2010] 2 S.C.R.
(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?
(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?
(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?
(d) Whether relief could be granted in a complaint
against the carrier/service provider, in the absence ·
of any proof of negligence?
(e) and whether the decision in Oberai's case is a
good law?
Dismissing the appeal, the Court
HELD: On Questions (a) to (c):
1. The assured entrusted the consignment for
G 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
H
ECONOMIC TRANSPORT ORGANIZATION v. CHARAN
891
SPINNING MILLS (P) LTD.
loss, alleging negligence and deficiency in service. The A
fact that in pursuance of a contract of insurance, the
assured had received from the insurer, the value of the
goods lost, either fully or in part, does not erase or reduce
the liability of the wrongdoer responsible for the loss.
Therefore, the assured as a consumer, could file a B
complaint under the Act, even after the insurer had settled
its claim in regard to the loss. [Para 10] [915-H; 916-A-C]
2.1. A contract of insurance is a contract of indemnity.
The loss/damage to the goods covered by a policy of C
insurance, may be caused either due to an act for which
the owner (assured) may not have a remedy against any
third party (as for example when the loss is on account
of an act of God) or due to a wrongful act of a third party,
for which he may have a remedy against such third party
(as for example where the loss is on account of D
negligence of the third party). In both cases, the assured·
can obtain reimbursement of the loss, from the insurer.
In the first case, neither the assured, nor the insurer can
make any claim against any third party. But where the
damage Is on account of negligence of a third party, the E )
· assured will have the right to sue the wrongdoer for
damages; and where the assured has obtained the value
of the goods lost from the insurer in pursuance of the
contract of insurance, the law of insurance recognizes as·
an equitable corollary of the principle of indemnity that F
the rights and remedies of the assured against the wrong-
, doer stand transferred to and vested in the insurer. The
equitable assignment of the rights and remedies of the
assured in favour of the insurer, implied in a contract of
indemnity, known as 'subrogation', is based on two basic G
principles of equity: (a) No tort-feasor should escape liability
for his wrong; (b) No unjust enrichment for the injured, by
recovery of compensation for the same Joss, from more than
one source. The doctrine of subrogation will thus enable
,,.,
'·
892
SUPREME COURT REPORTS
[2010] 2 S.C.R.
A the insurer, to step into the shoes of the assured, and
enforce the rights and remedies available to the assured.
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
B or interest in the property or right, which is the subject
matter of ttte assignment. [Paras 11 and 13] [916-C-H; 917A; 920-A-B]
Vasudeva Mudaliar vs. Caledonian Insurance Co .. AIR
C 1965 Mad. 159, referred to.
·
:D
E
National Fire Insurance Co. vs. McLaren 1886 (12) OR
682; Banque Financiere de la Cite vs. Pare (Battersea) Ltd.
1999 (1) A.C. 221; James Nelson and Sons Ltd. vs. Nelson
Line (Liverpool) Ltd. (No. 1) 1906 (2) KB 217, referred to.
Black's Law Dictionary; Dan B. Dobb's Law of Contract
2nd Edn 4.3 p 404; Laurence P. Simpson's Handbook on
Law of Suretyship 1950 Edn. p 205; Insurance Law by
MacGillivray & Parkington (7th Edn.), referred to.
2.2. Subrogation, as an equitable assignment, is
inherent, incidental and collateral to a contract of
indemnity, which occurs automatically, when the insurer
settles the claim under the policy, by reimbursing the
entire loss suffered by the assured. It need not be
F evidenced by any writing. But where the insurer does not
settle the claim of the assured fully, by reimbursing the
entire loss, there will be no equitable assignment of the
claim enabling the insurer to stand in the shoes of the
assured, but only a right to recover from the assured, any
G amount remaining out of the compensation recovered by
the assured from the wrongdoer, after the assured fully
recovers his loss. [Para 14] [922-E-G]
2.3. To avoid any dispute with the assured as to the
H
ECONOMIC TRANSPORT ORGANIZATION v. CHARAN 893
SPINNING MILLS (P) LTD.
right of subrogation and extent of its rights, the insurers A
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
B
instrument from the assured on settlement of the claim,
whether it will be a deed of subrogation, or subrogationcum-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 c
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 an~ simple subrogation but may 0
inadvertently or by way of excessive caution use wor.ds
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
E
subrogation and nothing more. [Para 14] [922-G-H; 923A-D]
2.4. The subrogations can be classified under three
broad categories: (i) subrogation by equitable
assignment; (ii) subrogation by contract; and (iii)
F
subrogation-cum-assignment. 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 G
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. [Para 15] (923-D-E; 924-F-G]
2.5. The assured has no right to deny the equitable
right of subrogation of the insurer in accordance with law,
H
894
SUPREME COURT REPORTS
[2010] 2 S.C.R.
-
t
A 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 r-ecover the balance of his
B 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
c by the terms agreed, which is a matter of negotiation
between the assured and insurer. [Para· 15) (924-H; 925A-B]
2.6. If a letter of subrogation containing terms of
assignment is to be treated only as an assignment by
D 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. Section 6 of 1882 Act
provides that property of any kind may be transferred
~
E 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. A transfer or assignment of a mere right to
sue for compensation will be invalid having regard to
F section 6(e) of the TP Act. But when a letter of
subrogation-cum-assignment
is
executed,
the
assignment is interlinked with subrogation, and not being
an assignment of a mere right to sue, will be valid and
enforceable. (Para 16) [925-C-E; 925-G-H]
G
H
2.7. The principles relating to subrogation can be
summarized as:
(i) Equitable right of subrogation arises when the
insurer settles the claim of the assu~ed, for the entire loss.
ECONOMIC TRANSPORT ORGANIZATION v. CHARAN 895
SPINNING MILLS (P) LTD.
When there is an equitable subrogation in favour of the A
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 8
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 C
Subrogation, reducing the terms of subrogation, the
rights of the insurer vis-a-vis the assured will be
governed by the terms of the Letter of Subrogation.
(iv) A subrogation enables the insurer to exercise the o
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 E
and the insurer a~ co-plaintiffs or co-complainants.
(v) Where the assured executed a subrogation-cumassignment 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 F
sue the wrongdoer on its own account and for its own
benefit. But as the instrument is a subrogation-cumassignment, 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 G
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. [Para 17] [927-A-H; 927-A]
H
I
'
896
SUPREME COURT REPORTS
[2010] 2 S.C.R.
A
3.1. Whether the document executed by the assured
in favour of the insurer is a subrogation simpliciter, or a
.subrogation-cum-assignment is relevant only in a dispute
between the assured and the insurer. It may not be
relevant for deciding the maintainability of a complaint
B under the Act. If the complaint is filed by the assured
(who is the consumer), or by the assured represented by
the insurer as its attorney holder, or by the assured and
the insurer jointly as complainants, the complaint will be
maintainable, if the presence of insurer is explained as
· C being a subrogee. Whether the amount claimed is the
total loss or only the amount for which the claim was
settled would make no difference for the maintainability
of the complaint, so long as the consumer is the
complainant (either personally or represented by Its
D attorney holder) or is a co-complainant along with his
subrogee. On the other hand, if the assured (who is the
consumer) is not the complainant, and the insurer alone
files the complaint in its own name, the complaint will not
be maintainable, as the insurer is not a 'consumer', nor
E 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
F assured-consignor is not the complainant or cocomplainant. 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
G 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. [Para 19] [929-G-H; 939-A-E]
H
3.2. If in a summary proceedings by a consumer
ECONOMIC TRANSPORT ORGANIZATION v. CHARAN
9§7
SPINNING MILLS (P) LTD.
against a service provider, the insurer is added as a coA
complainant or if the insurer represents the consumer as
a power of attorney, there is no need to examine the
nature of rights inter-se between the consumer and his
insurer. When the complaint is by the consignorconsumer, with or without the insurer as a coB
complainant, the service provider cannot require the
consumer forum to consider the nature of relationship
between the assured and the insurer or the nature and
true purport of the document produced as a letter of
subrogation. A wrong-doer cannot sidetrack the issue c
before the consumer forum. Once the 'consumer', that is
the assured, is the complainant, the complaint will be
maintainable subject to fulfillment of the requirements of
t,he Act. [Para 20] [931-A-D]
3.3. A document should be transaction-specific. Or at D
least an effort should be made to delete or exclude
inapplicable or irrelevant clauses. But where a large
number of documentation is required to be done by
officers not-conversant with the nuances of drafting, use
of standard forms with several choices or alternative
E
provisions is found necessary. The person preparing the
document is required to delete the terms/clauses which
are inapplicable. But that is seldom done. The result Is
that the documents executed in standard forms will have
several irrelevant clauses. Computerisation and large
F
legal departments should have enabled insurance
companies, banks and financial institutions to ~I) improve
their documentation processes and omit unnecessary
and repetitive clauses; (ii) avoid incorporation of other
documents by vague references; and (iii) discontinue G
pasting or annexing of slips. But that is seldom done. If
documents are clear, specific and self-contained,
disputes and litigations will be considerably reduced.
[Para 22] [935-8-E]
H
898
SUPREME COURT REPORTS
[2010] 2 S.C.R.-
A
3.4. The use of the words "we hereby assign, transfer
and abandon to you all our actionable rights, title and
interest" in the document, is in regard to rights and
remedies against (1) railway administration (2) sea carriers
(3) agents of sea carriers (4) port authorities (5) customs
B
authorities and (6) persons whomsoever is liable in
respect thereof. Even though, the matter relates to
carriage of goods by road, the claims or remedies against
a road carrier are not even mentioned. Excluding the
~
irrelevant clauses, the document continues to be a letter
c of subrogation. [Para 21] [934-G-H; 935-A]
Correctness of oberia's case:
4.1. There is no doubt that in Oberia's case the first
portion which stated that all rights were assigned,
D transferred and abandoned in favour of the insurer_ and
also empowered the insurer to sue in its own name, if read
in isolation would amount to an assignment. But if those
words are read with the other recitals and the words "in
consideration of your paying to us the sum of Rs.64,137/
E
- only in full settlement of our claim for non-delivery/
shortage and damage, under policy issued by you .... "
make it clear that it was a subrogation-cum-assignment.
Further, the second operative portion which states that
"we hereby subrogate to you the same rights as we have
F
in consequence of or arising from the said loss or
damage" are not words of assignment. When the words
used are: "we hereby subrogate to you" and not "we
h\;reby transfer or assign in your favour", having regard
to the settled meaning of "subrogate", the said words
G could not operate as an absolute assignment, 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. Thus,
H
ECONOMIC TRANSPORT ORGANIZATION v. CHARAN
899
SPINNING MILLS (P) LTD.
.,
Oberai's case was not correctly decided, as it held a 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 the
B
ultimate decision in Oberai may be correct as the
complaint was filed by the insurer, in its own name and
on its own behalf making a claim for the entire value of
the .goods, in excess of what was paid to the as·sured.
Though the assured was belatedly impleaded as a coC
complainant, the nature and contents of the complaint
was not apparently changed, and continued to be one by
the insurer as assignee. On those peculiar facts, the
finding that the complaint under the Act by the insurer
(who was not a consumer) was not maintainable, was 0
justified. [Para 23] [937-8-H; 938-A-C]
4.2. Para 23 of the decision in Oberai's case does not
mean that when the consignment is received by the
carrier from the consignor and put it in the course of
transportation, the carrier has provided the service and
E
thereafter either ceases to be a service provider or
ceases to be responsible for delivery of the goods, and
that consequently, the consignor ceases to be a
'consumer'. All that it meant was that in a contract for
carriage of goods between the consignor and the carrier,
F
if the consignor assigns the right to claim damages to an
assignee, after the goods are lost or damaged, the
assignee cannot claim to be a 'consumer' under the Act.
It impliedly meant that if the assignment had been done
before the loss or damage to the goods, then the G
assignment would have been in regard to 'property' and
not a mere right to sue, and the assignee as consignee
would be entitled to sue the carrier. [Para 23] [938-0-G]
H
900
SUPREME COURT REPORTS
[2010] 2 S.C.R.
A Question (d):
5. 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
8 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
C 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
D 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 u/s. 9 of
the Carriers Act. The submission that the presumption u/
s. 9 of the Carriers Act is available only in suits filed
E before civil courts and not in other civil proceedings
under other Acts, is not tenable. It cannot be accepted
that the presumption u/s. 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
F not liable to compensate the respondents for the loss.
[Paras 27, 28 and 29] [940-D-G; 940-H; 941-A; 942-C]
Patel Roadways Ltd. v. Bir/a Yamaha Ltd. 2000 (4) SCC
91; Economic Transport Organization vs. Dharward District
G Khadi Gramodyog Sangh 2000 (5) SCC 78, relied on.
Amendment of s. 2(d):
6. Section 2(d) of Act was amended by Amendment
Act 62 of 2002 with effect from 15.3.2003, by adding the
H words "but does not include a person who avails of such
ECONOMIC TRANSPORT ORGANIZATION v. CHARAN 901
SPINNING MILLS (P) LTD.
services for any commercial purpose" in the definition of A
'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 B
not apply to complaints filed before the amendment. [Para
25] (939-E-G]
Conclusion:
7 .1. (a) The insurer, as subrogee, can file a complaint C
under the Consumer Protection Act, 1986 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 D
(service provider).
(b) 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 E
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) The insurer cannot in its own name maintain a F
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) Oberai is not good law insofar as it construes a G
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. [Para 24] (939-G-H; 939A·D]
H
902
SUPREME COURT REPORTS
[2010] 2 S.C.R.
A
*Oberai Forwarding Agency v. New India Assurance Co.
Ltd. 2000 (2) sec 407, Partly overruled.
B
7 .2. In the instant case, the loss of consignment by
the assured and settlement of claim by the insurer by
paying Rs.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.
C
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 Rs.447,436. The said order was affirmed by the State
Forum and the National Forum. There is no reason to
D
interfere with the same. [Para 30] [942-D-G]
Case Law Reference:
1886 (12) OR 682
Referred to.
Para 12
E
1999 (1) A.C.221
Referred to.
Para 12
1906 (2) KB 217
Referred to.
Para 13.
AIR 1965 Mad. 159
Referred to.
Para 13
F
2000 (2) sec 407
Partly overruled. Para 24
2000 (4) sec 91
Relied on.
Para 28
2000 (5) sec 78
Relied on.
Para 29
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
G
5611 of 1999.
H
From the Judgment & Order dated 19. 7.1999 of the
National Consumer Disputes Redressal Commission in R.P.
No. 368 of 1999.
ECONOMIC TRANSPORT ORGANIZATION v. CHARAN
903
SPINNING MILLS (P) LTD.
G.E. Vahanvati, Sol. Genl. of India Atul Nanda, Rameeza
A
Hakeem, Sandeep Bajaj, Kishore Rawat, Dhiraj (for M.K. Dua)
Dalip K. Malhotra, Pawan K. Bhal, Rajesh Malhotra, M.M.
Kashyap, Dr. Meera Agarwal, Goodwill lndeevar, S.L. Gupta,
Ram Ashray, K.L. Nandwani, Laskhmi Narayanan, V.
Ramasubramanian, Debasis Misra, A.K. Raina, Binay K. Das,
B
Anil Kumar Jha, Joy Basu, Ruchi Bharda, B.K. Satija, Maiban
N. Singh, Anil Nauriya, Pyoli and Sumita Hazarika for the
Appellant.
B. Sen, R.K. Singh, Deepa Rai, Jay Savla, Meenakshi
C
Ogra, Rumi Chanda, K.K. Tyagi, lftekhar Ahmad, P.
Narasimhan, A.K. Raina, Binay K. Das, R.D. Upadhyay, Dinesh
Chander Yadav, Vibhuti Sushant, A.S. Rishi, Dr. Kailash
Chand, Ajay Garg, Sanjay Garg, K.V. Viswanathan, Rishi
Maheshwari, Shally Bhasin Maheshwari, Vikramjeet Banerjee,
Megha Mukerjee, Anup Kumar (N.P. on 3.12.2008) and · D
Abhishek Kaushik, (N.P. on 3.12.2008) for the Respondents.
The Judgment of the Court was delivered by
R.V. RAVEENDRAN, J. 1. This appeal was referred by
E
a two-Judge Bench to a larger bench on 30.11.2000, being of
the view that the decision of this Court in Oberai Forwarding
Agency v. New India Assurance Co. Ltd. -2000 (2) SCC 407,
required reconsideration. In turn, the three-Judge Bench has
referred the matter to a Constitution Bench on 29.3.2005.
Factual Background :
2. The first respondent (also referred to as the 'Assured'
or the 'consignor') is a manufacturer of the cotton yarn. It took
F
a policy of insurance from the second respondent (National
G
Insurance Co. Ltd, referred to as the 'Insurer'), covering transit
risks between the period 11.5.1995 and 10.5.1996 in respect
of cotton yarn sent by it to various consignees through rail or
road against theft, pilferage, non-delivery and/or damage. The
first respondent entrusted a consignment of .hosiery cotton yarn
H
904
SUPREME COURT REPORTS
[2010] 2 S.C.R.
A of the value of Rs.7,70,948/- to the appellant (also referred to
as the 'carrier') on 6.10.1995 for transportation and delivery to
a consignee at Calcutta. The goods vehicle carrying the said
consignment met with an accident and the consignment was
completely damaged. On the basis of a surveyor's certificate
B issued after assessment of the damage, the second
respondent settled the claim of the first respondent for
Rs.447,436/- 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
c 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
Rs.447,436/- with interest at 12% per annum, for deficiency in
D 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
E 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 Rs.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
F basis of the subrogation. The District Forum held that the failure
to deliver the consignment in sound condition was a deficiency
in service, in view of the unrebutted presumption of negligence
arising under sections 8 and 9 of the Carriers Act, 1865. The
appeal filed by the appellant before the State Consumer
G Disputes Redressal Commission, Madras, challenging the said
order was dismissed on 2.4.1998. The appellant thereafter filed
a revision before the National Consumer Disputes Redressal
Commission in the year 1999. The National Commission
dismissed the appellant's revision petition by a short nonH speaking order dated 19.7.1999 which reads thus: "We do not
ECONOMIC TRANSPORT ORGANIZATION v. CHARAN 905
SPINNING MILLS (P) LTD. [RV. RAVEENDRAN, J.]
find any illegality or jurisdictional error in the order passed by A
the State Commission." The said order is challenged in this
appeal by special leave.
The Issue
4. The appellant herein resisted the complaint on the B
following grounds:
(i) The Assured (consignor) had insured the goods against
transit risk with the Insurer. The Insurer had already settled
the claim of the Assured. As a consequence, the Assured c
had no surviving claim that could be enforced against the
carrier. At all events, as the Assured had transferred all its
interest in the claim to the Insurer, it had no subsisting
interest or enforceable right.
(ii) The Insurer did not entr-ust the consignment to the carrier
for transportation. The appellant did not agree to provide
any service to the Insurer. There was no privity of contract
between the Insurer and the appellant. As a result, the
Insurer was not a 'consumer' as defined in the Act and a
complaint under the Act was not maintainable.
D --
E
(iii) The letter of subrogation was executed by the Assured
(consignor), after the goods were damaged. This
amounted to a transfer of a mere right to sue by the
Assured in favour of the Insurer, which was invalid and
F
enforceable.
(iv) There was no negligence on the part of its driver and
the accident occurred due to circumstances beyond his
control. The respondents did not place any evidence to
prove any negligence, in spite of appellant's denial of G
negligence. Having regard to s.ection 14(1 )(d) of the Act,
liability can be fastened on a carrier, for payment of
compensation, only by establishing that the consumer had
suffered loss or injury due to the negligence of the carrier
as a service provider. In view of the ~ecial provision in
H
906
SUPREME COURT REPORTS
[201 O] 2 S.C.R.
A
section 14(1 )(d) of the Act, the complainants under the Act
were not entitled to rely upon the statutory presumption 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
B
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
C
'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
D
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
E
assignee of the claim. We extract below the relevant portion of
F
G
the said judgment:
"17. 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.
xxxxx
·19. With the distinction between subrogation and
H
assignment in view, let us examine the letter of subrogation
ECONOMIC TRANSPORT ORGANIZATION v. CHARAN 907
SPINNING MILLS (P) LTD. [RV. RAVEENDRAN, J.]
executed by the second respondent in favour of the first A
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
B
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 on consequence of or arising from the said loss c
or damage".
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 t~e first
respondent full power to take lawful means to recover the D ,
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 amou~t paid
E
by the first respondent to the second respondent. TM"dly,
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
F
assignment in favour of the first respondEmt.
21. The second clause, undoubtedly, used the word
"subrogate", but it conferred upon the first respondent "the
same rights" that the second respondent had "in
c~nsequence of or arising from the said los's or damage", G
which meant that the transfer was not HIJiifed to the
quantum paid by the first respondent to: the second
respondent but encompassed ~fl the compensation for the
(•
loss. Even by the· second clause, therefore, 'there was an H
A
B
c
D
E
F
G
H
908
SUPREME COURT REPORTS
[2010] 2 S.C.R.
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.