Financier Can't Claim Insurance Over Theft Of Vehicle Surrendered By Insured Owner : Supreme Court
The Supreme Court has held that a mere surrender of an insured vehicle by its owner to another person, who had financed the purchase of a vehicle, would not be sufficient for the financer to claim indemnification in the event of loss or theft of a vehicle.
A bench of Justice Sandeep Mehta and Justice Vijay Bishnoi refused to interfere with the National Consumer Disputes Redressal Commission's findings, which had ruled in favour of the insurance companies, acknowledging that there was no privity of contract between the Appellant-vehicle financer and the Respondent-insurance company to fasten the liability upon the insurance company for loss of vehicle due to theft.
“It is a settled position of law that a contract of insurance is a personal contract only between the insured and the insurance company and no third party can raise any claims pursuant to the said contract. In the present case also, even if we assume that the Insured Person had surrendered the vehicle to the Appellant, then also the fact remains that the Appellant cannot be considered as the owner of the vehicle and hence, the Insurance Company could not be forced to indemnify the Appellant herein.”, the Court observed.
The dispute arose after K. Prakashchand (appellant), who had financed a vehicle purchased by one Somashekhar, claimed insurance proceeds from Oriental Insurance Co. Ltd. following the vehicle's alleged theft. According to the financier, the borrower had surrendered the vehicle in December 2003 due to financial difficulties. While the vehicle was allegedly in the financier's custody, it was stolen. After the police failed to trace the vehicle and filed a closure report, the financier lodged a claim with the insurance company. The insurer repudiated the claim, prompting consumer proceedings..
The insurance company repudiated the claim, stating that the Appellant was not a party to a contract between the vehicle owner and itself, neither any document was supplied by the Appellant proving that the vehicle was surrendered nor particulars of vehicle theft were provided by the Appellant to the Respondent-insurance company.
The District Consumer Forum allowed the Appellant's claim; however, the State Commission overturned the District Commission's order, which was upheld by the National Commission, prompting the Appellant to move to the Supreme Court.
Affirming the impugned findings, the Court said that in the absence of any privity of a contract between the Appellant and Respondent, fastening the liability upon the insurance company for the vehicle theft, while in the Appellant's possession, would not be justifiable.
“…this Court finds that the National Commission has rightly observed that the Respondent-Insurance Company cannot be forced to accept the claim of the Appellant in light of the fact that the Respondent- Insurance Company is not a party to the contract between the Appellant and the Insured Person.”, the court observed.
“We find that the National Commission was correct in holding that there is no privity of contract between the Appellant and the Respondent- Insurance Company and therefore, we find no good reasons to interfere with the impugned order.”, the court added.
Accordingly, the appeal was dismissed.
Cause Title: K. PRAKASHCHAND VERSUS ORIENTAL INSURANCE CO. LTD.
Citation : 2026 LiveLaw (SC) 634
Appearance:
For Appellant(s) : Mr. T. V. S. Raghavendra Sreyas, AOR Ms. Gayatri Gulati, Adv.
For Respondent(s) :Ms. Sakshi Mittal, AOR