Subrogation of Rights By Commercial Entity Doesn't Extend Status Of 'Consumer' To Subrogee, NCDRC Allows Appeal Filed By East India Transport Agency

Brief Facts:

Dhariwal Industries (“Dhariwal”) entered into an agreement with East India Transport Agency (“Transport Agency”) for delivering a consignment of 350 cartons of 'Gutkha' in Kolhapur. The consignment was successfully dispatched by the Transport Agency. However, it failed to reach the buyers. The Transport Agency appointed cargo tracers to locate the consignment. It was discovered that the consignment was stolen while it was in the custody of the Transport Agency. Despite acknowledging the loss and issuing a no-delivery certificate, the Transport Agency failed to reimburse the consignment's value.

Therefore, Dhariwal contacted Bajaj Allianz General Insurance Company (“Insurance Company”) as the consignment was insured under a Marine Insurance Policy. The Insurance Company paid Rs. 28,72,142/- for the settlement of the claim. Upon receiving the payment, Dhariwal executed a letter of surrogation and special power of attorney in favour of the Insurance Company, making it entitled to recover the claim for losses from the Transport Agency.

Subsequently, Dhariwal and the Insurance Company filed a consumer complaint against the Transport Agency before the State Consumer Disputes Redressal Commission, Maharashtra (“State Commission”). The complaint was partially allowed, and the Transport Agency was directed to pay Rs. 28,72,142/- to the Insurance Company and pay Rs. 25,000/- as costs of litigation to Dhariwal and the Insurance Company.

Dissatisfied with the order of the State Commission, the Transport Agency filed an appeal to the National Consumer Disputes Redressal Commission (“NCDRC”). It contended that the State Commission failed to consider that Dhariwal engaged with the Transport Agency for commercial purposes, aimed at generating profits. Further, the right to recover the amount was subrogated to the Insurance Company, legally placing its status below Dhariwal.

Observations of the Commission:

The NCDRC delved into the issue of whether Dhariwal qualified as a 'Consumer' under the Consumer Protection Act, 1986, in light of its transaction with the Transport Agency. The definition of 'consumer' under Section 2(1)(d) of the Act was perused. It was observed that Dhariwal was a commercial entity involved in commercial activities, which sought the services of the Transport Agency for the delivery of goods. Given the commercial nature of this engagement, Dhariwal did not qualify as a 'consumer' under the Act.

Further, the NCDRC held that the Insurance Company acted as a 'subrogee' of Dhariwal under the Marine Insurance Policy to mitigate transit risks. However, its engagement with the Transport Agency was commercial in nature, rendering it ineligible as a consumer. Consequently, even the Insurance Company could not be classified as a consumer, thus lacking standing to maintain consumer complaints in this context.

In light of these observations, the NCDRC concluded that the State Commission erred in passing its decision without considering the commercial nature of the transactions. The appeal was allowed, and Dhariwal and the Insurance Company were granted liberty to pursue their legal remedy through the appropriate court.

Case Title: East India Transport Agency vs Dhariwal Industries Ltd. and Anr.

Case No.: First Appeal No. 232 of 2019

Advocate for the Appellant: Mr Sukumar Patt Joshi, Mr Biswajit Patar. Mr Manoj Kumar, Mr Ram and Mr Vedant Kumar Mund

Advocate for the Respondent: Mr Davesh Vashistha and Mr Sanjit Shenoy