Transfer of Rights by way of Subrogation
Subrogation of Rights By Commercial Entity Doesn't change Status Of entity to 'Consumer' ,it remains 'Commercial'
National Commission held that an entity engaged in commercial activities
solely for the purposes of profit-making cannot be said to be covered under the
definition of a 'consumer' under the Consumer Protection Act, 2019. Even if the
commercial entity subrogates its right to recover the amount to a 3rd party,
the 3rd party would not be considered a 'consumer' for the purposes of the Act.
Issue: Question of Commercial Purpose
Case Title: East
India Transport Agency vs Dhariwal Industries Ltd. and Anr.
Case No.: First
Appeal No. 232 of 2019
Decided
on 1st May 2024
Dr Prem Lata
What
is subrogation?
Substitute
(one person or thing) for another in respect of a debt or insurance claim and
any associated rights and duties:
"a guarantor may be subrogated to the rights of the creditor"
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 but it never reached to buyer, Dhariwal.Later it was
observed by transport Agency that the consignment was stolen while it was in
the custody of the Transport Agency. The Transport Agency refused to reimburse
the consignment's value.
Dhariwal contacted Bajaj Allianz General 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 making it entitled to
recover the claim for losses from the Transport Agency.
Now Insurance Company filed a consumer complaint against the Transport
Agency making Dhariwal also one of the parties before the State Consumer
Disputes Redressal Commission, Maharashtra (“State Commission”) for recovery of
amount for which it had got subrogation letter from Dhariwal. 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.
The Transport Agency filed an
appeal to the National Consumer Disputes Redressal Commission (“NCDRC”). It
contended that Dhariwal engaged with the Transport Agency for commercial purposes,
hence not a consumer
Matter comes to National Commission.
There were two issues before the Commission –
1.
Whether Dhariwal is a consumer while
dealing with Transport agency.
2.
Whether Insurance company could file
consumer complaint having letter of subrogation
National
Commission Observed and held
Dhariwal
had commercial dealings with transport company and hence cannot be classified
as consumer under section 2 of the Consumer Protection Act
Subrogation
of Rights by Dhariwal Industry to insurance company, status of insurance
company shall remain the same what was held by Dhariwal Industry. Since
Dhariwal Industry had dealings with transport agency for profit and
loss/business, subrogatee shall also enjoy the same status and cannot be
considered consumer
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