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 1^st 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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