Holding

In a theft of a comprehensively insured vehicle, a breach of the policy condition regarding the nature of use is not relevant, and the insurer is liable to indemnify the owner, at most on a non‑standard basis.

Summary

The respondent's Mahindra Scorpio was stolen shortly after purchase and he filed a claim under a comprehensive motor insurance policy. The insurer rejected the claim, alleging that the vehicle was being used as a taxi, which violated the policy's terms for private use. The District Consumer Disputes Redressal Forum upheld the insurer's rejection, but the State Consumer Disputes Redressal Commission allowed the claim on a non‑standard basis, awarding 75% of the sum insured, a decision affirmed by the National Consumer Disputes Redressal Commission. On appeal, the Supreme Court held that in cases of theft, a breach of the condition concerning the nature of use is not germane and the insurer is liable to indemnify, at most on a non‑standard basis. Consequently, the Court dismissed the appeal and upheld the orders of the State and National Commissions.

Issues considered

Whether an insurer can repudiate a theft claim on the ground that the vehicle was being used for commercial purposes contrary to the policy terms.
Whether, in case of theft of a comprehensively insured vehicle, the claim must be settled on a non‑standard basis when there is a breach of the nature‑of‑use condition.

Legislation cited

Motor Vehicles Act, 1988s. 149

Subjects

motor vehicle insurancetheftbreach of conditionnon‑standard basisconsumer dispute redressalindemnitycomprehensive policy

Judgment

[2008] 7 S.C.R. 1047
--{

NATIONAL INSURANCE CO. LTD. A
v.
NITIN KHANDELWAL
(Civil Appeal No. 3409 of 2008)

.. A.
MAY 8, 2008
B
[TARUN CHATTERJEE AND DALVEER BHANDARI, JJ.]

Insurance - Theft of insured vehicle - Insurance claim -
Rejection of on the ground that use of the vehicle was contrary
to the terms and conditions of the insurance policy- Complaint c
- District Consumer Disputes Redressal Forum upholding the
rejection - Appellate as well as Revisional Court granting the
claim on non-standard basis - On appeal, held: Insurance
Company is liable to indemnify the claimant - In the case of
> . theft of vehicle, breach of condition is not germane.
-+ D
The vehicle of t'1e respondent was stolen. He filed
an insurance claim which was denied by the appellant-
insurance Company on the ground that the respondent
by using the vehicle for commercial use, violated the terms
... and conditions of the insurance policy. Respondent filed E
a complaint before District Disputes Redressal Forum
wherein rejection of the claim by the insurance company
was upheld. In appeal, State Consumer Dispute Redressal
Commission held that the claim was required to be settled
t on non-standard basis and thus the claimant was entitled F
to 75% of the insured sum. In revision National Consumer
Disputes Redressal Commission upheld the order of the
State Commission. Hence the present appeal.
Disposing of the appeal, the Court
G
HELD: The view taken by the State Commission
, _.\ cannot be faulted and the National Commission has
correctly upheld the said order of the State Commission.
In the case in hand, the vehicle, has been snatched or
1047 H
1048 SUPREME COURT REPORTS [2008] 7 S.C.R

A stolen. In the case of theft of vehicle breach of condition
is not germane. In case of theft of vehicle, nature of use of
the vehicle cannot be looked into and the Insurance
Company cannot repudiate the claim on that basis. The
appellant Insurance Company is liable to indemnify the
B owner of the vehicle when the insurer has obtained r;
comprehensive policy for the loss caused to the insurer.
The State Commission allowed the claim only on non-
standard basis, which has been upheld by the National
Commission. [Paras 13,14 and 15] [1052-G, 1052-C,F; D,E]
C National Insurance Co. Ltd. v. Kusum Rai and Ors. 2006
(4) sec 250 - distinguished.

Jitendra Kumar v. Oriental Insurance Co. Ltd. and Anr.
2003 (6) SCC 420; National Insurance Co. Ltd. v. Swaran
D Singh and Ors. 2004 (3) SCC 297 - referred to.
CIVILAPPELLATE JLIRISDCTION: Civil Appeal No. 3409
of 2008.
From the Judgment & Order dated 21.9.2006 of the
E National Consumers Disputes Redressal Commission, New
Delhi in R P No. 2638/2006.
S.L. Gupta, Vishnu Kr. Sharma and Goodwill lndeevar for
the Appellant.

Anish Kumar Gupta, Deep Shikha Bharti, Rita Gupta and
F Priyanka for the Respondent. ""
The Judgment of the Court was delivered by
DALVEER BHANDARI, J. 1. Leave granted.
G 2. This appeal is preferred against the order dated 21 51
September, 2006 passed by the National Consumer Disputes
Redressal Commission, New Delhi (hereinafter referred to as ,_
the National Commission) in R. P. No. 2638 of 2006.
3. Brief facts of the case which are necessary to dispose
H of the matter are recapitulated a::; under:-
NATIONAL INSURANCE CO. LTD. v. NITIN 1049
KHANDELWAL [DALVEER BHANDARI, J]
-1
4. The respondent Nitin Khandelwal had purchased the A
vehicle Mahindra Scorpio bearing No.HR-18-8743 on
28.5.2003. On 27.9.2003, he had sent his vehicle to bring his
children from Jaipur. On the way, some unknown people stopped
the vehicle, tied the driver and dumped him on the way and
snatched away the vehicle. The report was lodged by the driver

r
B
at the police station and the appellant Insurance Company was
informed of the same. Thereafter, on 2.10.2003, the respondent
filed an insurance claim, which was rejected by the Insurance
Company.

5. The appellant's version was that the vehicle was being c
used as a taxi and the four passengers had hired the vehicle for
going from Gwalior to Karoli and those passengers, on the way,
snatched the vehicle from the driver. The vehicle was insured
for personal use and it was being used by the respondent as a
.. t taxi. According to the appellant, the respondent had violated D
the terms of the insurance policy and, therefore, rejected the
claim. The respondent filed ·a complaint before the District
Consumer Disputes Redressal Forum, District Gwalior, M.P.
(hereinafter referred to as "the District Forum").
E
6. According to the District Forum, the respondent had
violated the terms and conditions of the insurance policy and
that the appellant Insurance Company was justified in rejecting
the claim of the respondent The respondent, aggrieved by the
said order of the District Forum, filed an appeal before the M.P.
State Consumer Disputes Redressal Commission (hereinafter F
referred to as "the State Commission").
7. The State Commission observed that the theft of the
vehicle has not been denied by the Insurance Company.
However, the claim of the respondent under the policy was
G
repudiated by the Insurance Company solely on the ground that
_..., the vehicle though registered and insured as a private vehicle,
at the time of theft, was being used as a taxi for carrying
passengers on payment So, the said vehicle was being used
contrary to the terms and conditions of the insurance policy.
H
1050 SUPREME COURT REPORTS [2008] 7 S.C.R

A 8. The State Commission placed reliance on the decision
of United India Insurance Co. Ltd. v. Gian Singh [2006 CT J
221 (CP) (NCDRC)] wherein it was held by the National
Commission that in a case of violation of condition of the policy
as to the nature of use of the vehicle, the claim ought to be settled
B on non-standard basis. Similar view was taken by the State
Commission in Appeal No.1463 of 2004 (Track Way Securities
& Finance Pvt. Ltd. v. National Insurance Co. & Others)
decided on 23.3.2006. Relying on the said judgment, the State
Commission observed that the claim of the respondent herein
c ought to be settled on non-standard basis and the complainant
respondent was thus entitled to the 75% of the sum insured.
Consequently, the State Commission directed the appellant
herein to pay 75% of the amount i.e. Rs.4,83,000/- with interest
@ 6% from the date of the complaint till payment.
D 9. The appellant, aggrieved by the said order of the State ~
~
Commission, preferred a re•tision petition before the National
Consumer Disputes Redressal Commission (hereinafter
referred to as "the National Commission"). The National
Commission, after considering the fact that the vehicle was used
E for commercial purpose, granted reimbursement on the non-
standard basis as per the policy of the insurance company and
observed that the order of the State Commission did not call for
any interference.
10. The appellant, aggrieved by the impugned order of
F the National Commission, preferred this appeal before this court.

11. Pursuant to the notice issued by this court, the
respondent has filed a comprehensive counter affidavit. The
appellant relied upon the judgment of this court in the case of
G National Insurance Co. Ltd. v. Kusum Rai & Others (2006) 4
SCC 250. According to the respondent, this case has no
application so far as the instant case is concerned. The aforesaid
case relates to the accident where the main or contributory cause •
of accident was negligent driving at the relevant time of the
accident. The instant case relates to the theft of the car. It is not
H
NATIONAL INSURANCE CO. LTD. v. NITIN 1051
KHANDELWAL [DALVEER BHANDARI, .I.]
-1
a case of third party risk. In the instant case, the vehicle has not A
..... been recovered. It is also incorporated in the counter affidavit
•
that it is not disputed that the vehicle was comprehensively
insured. Since the vehicle in question had been stolen, therefore,
in the case of theft of vehicle, the breach of condition is not
germane. In Kusum Rai's case (supra), the cases of Jitendra B
Kumar v. Oriental Insurance Co. Ltd. & Another (2003) 6 SCC
420 and National Insurance Co. Ltd. v. Swaran Singh & Others
(2004) 3 sec 297 were also considered. This court in Jitendra
1 Kumar's case, in paras 9 and 10, observed as under:-

"9. The question then is; can the Insurance Company c
repudiate a claim made by the owner of the vehicle which
is duly insured with the company, solely on the ground that
the driver of the vehicle who had nothing to do with the
accident did not hold a valid licence? The answer to this
I
question, in our opinion, should be in the negative. Section D
I
149 of the Motor Vehicles Act, 198~ on which reliance
was placed by the State Commission, in our opinion, does
not come to the aid of the Insurance Company in
repudiating a claim where the driver of the vehicle had not
contributed in any manner to the accident. Section E
149(2)(1 )(ii) of the Motor Vehicle Act empowers the
Insurance Company to repudiate a claim wherein the
vehicle in question is damaged due to an accident to
which driver of the vehicle who does not hold a valid driving
licence is responsible in any manner. It does not empower F
the Insurance Company to repudiate a claim for damages
which has occurred due to acts to which the driver has not,
in any manner, contributed i.e. damages incurred due to
reasons other than the act of the driver.
10. It is the case of the parties that the fire in question G
which caused damage to the vehicle occurred due to
, -\ mechanical failure and not due to any fault or act, or
I( -. omission of the driver. Therefore, in our considered

-
· opinion, the Insurance Company could not have repudiated
the claim of the- appellant." H
1052 SUPREME COURT REPORTS (2008] 7 S.C.R.

}- -
A 12. Similarly, in Swaran Singh's case (supra), this court
has held as under:
"If on facts, it is found that the accident was caused solely
because of some other unforeseen or intervening causes
like mechanical failures and similar other causes having
B no nexus with the driver not possessing requisite type of
)-.
licence, the insurer will not be allowed to avoid its liability
merely for technical breach of conditions concerning
driving licence."
~

c 13. In the case in hand, the vehicle has been snatched or
stolen. In the case of theft of vehicle breach of condition is not
germane. The appellant Insurance Company is liable to
indemnify the owner of the vehicle when the insurer has. obtained
comprehensive policy for the loss caused to. the insurer. The
respondent submitted that even assuming that there was a
D
breach of condition of the insurance policy, the appellant ~ '
Insurance Company ought to have settled the claim on non-
standard basis. The Insurance Company cannot repudiate the
claim in toto in case of loss of vehicle due to theft.

E 14. In the instant case, the State Commission allowed the
claim only on non-standard basis, which has been upheld by
the National Commission. On consideration of the totality of the
facts and circumstance in the case, the law seems to be well
settled that in case of theft of vehicle, nature of use of the vehicle
F cannot be looked into and the Insurance Company cannot
repudiate the claim on that basis.
15. In the facts and circumstances of the case, the real
question is whether, according to the contract between the
respondent and the appellant, the respondent is required to be
G indemnified by the appellant. On the basis of the settled !egal
position, the view taken by the State Commission cannot be
faulted and the National Commission has correctly upheld the )' '
said order of the State Commission.
16. The State Commission has allowed only 75% claim of
H
NATIONAL INSURANCE CO. LTD. V. NITIN 1053
KHANDELWAL [DALVEER BHANDARI, J.]

the re,spondent on non-standard basis. We are not deciding A
whether the State Commission was justified in allowing the claim
of the respondent on non-standard basis because the
respondent has not filed any appeal against the said ordeL The
said order of the State Commission was upheld by the National
Commission. B
17. In our considered view, no interference is called for.
This appeal is accordingly disposed of. In the facts and
circumstances of the case, the parties are directed to bear their
own costs.
c
K.K.T. Appeal disposed of.