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When an insurable incident occurs, there should be no fundamental breach of the conditions in the contract of insurance: Supreme Court of India

Driving or using the vehicle without a valid registration amounts to a clear violation of Section 39 and 192 of the Motor Vehicles Act, 1988 which results in a fundamental breach of the terms and conditions of a policy as upheld by the court in the case United India Insurance Co. Ltd Vs Sushil Kumar Godara [CIVIL APPEAL NO. 5887 OF 2021] citing the judgment of Narinder Singh Vs New India Assurance Co. Ltd through the learned bench of Justice S. Ravindra Bhat.

Brief facts of the case are that the respondent-complainant obtained an insurance policy from the insurer (Appellants) for his car which had a temporary registration. The temporary registration of the vehicle, however, expired on 19-07-2011. On 28-07-2011 the complainant went to Jodhpur for business purposes; and stayed in Geeta Guest House at night. Whilst there, his vehicle was parked outside the guest house premises. When the respondent awoke in the morning, he found that the car had been stolen. He lodged a first information report (FIR) on 29-07-2011 with PS Ratanada, Jodhpur alleging commission of offenses under Section 379, IPC. However, on 30-09-2011 the police lodged a final report stating that the vehicle was untraceable.

The respondent claimed the loss, from the appellant/insurer. The insurance claim, however, was repudiated. Aggrieved by the repudiation of his claim the respondent/complainant filed a complaint before the District Forum Consumer Protection, Shri Ganganagar. It was held that repudiation of the claim by the insurer did not amount to deficiency in service on its part. Aggrieved by the dismissal of his complaint, the respondent/complainant approached the State Commission. The State Commission set aside the order of the District Forum and allowed the appeal. The insurer preferred a revision petition before the National Consumer Dispute Redressal Commission which was dismissed, affirming the State Commission’s reasoning.

Learned counsel for the appellants, Mr. Amit Singh, AOR, submitted that the NCDRC committed an error in not appreciating the judgment of this Court in Narinder Singh Vs New India Assurance Co. Ltd. He also relied on a previous order of the NCDRC, i.e., Naveen Kumar Vs National Insurance Company Ltd. It was urged that the impugned order should be set aside, since the NCDRC ignored a binding judgment of this court, and disregarded the circumstance that the vehicle in question, had no registration. This constituted a fundamental breach of the policy, entitling the insurer to repudiate the claims under it.

The hon’ble court, while observing the abovementioned judgments, reiterated that the temporary registration of the respondent’s vehicle had expired on 28-07-2011. Not only was the vehicle driven, but also taken to another city, where it was stationed overnight in a place other than the respondent’s premises. The court also stated that “It is of no consequence that the car was not plying on the road when it was stolen; the material fact is that concededly, it was driven to the place from where it was stolen, after the expiry of temporary registration. But for its theft, the respondent would have driven back the vehicle. What is important is this Court’s opinion of the law, that when an insurable incident that potentially results in liability occurs, there should be no fundamental breach of the conditions contained in the contract of insurance.” The court opined that the NCDRC’s order cannot be sustained. Furthermore, the NCDRC should not have overlooked and disregarded a clear binding judgment of this Court.

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Judgment Reviewed by – Aryan Bajaj

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