Jammu & Kashmir High Court
United India Insurance Company Limited vs Gurcharan Singh on 16 October, 2025
Author: Sanjeev Kumar
Bench: Sanjeev Kumar
Sr. No. 49 2025:JKLHC-JMU:3434-DB
HIGH COURT OF JAMMU & KASHMIR AND LADAKH
AT JAMMU
WP (C) No. 2885/2023
Reserved on : 07.10.2025
Pronounced on: 16 .10.2025
Uploaded on: 16 .10.2025
Whether the operative part or full
judgment is pronounced: Full
United India Insurance Company Limited, .....Petitioner(s)
through its Deputy Manager, Divisional Office-I,
Opposite Presentation Convent School,
National Highway, 21/C/B Gandhi Nagar,
Jammu.
Through :- Mr. Dinesh Singh Chauhan, Advocate with
Ms. Damini Chauhan, Advocate
v/s
Gurcharan Singh, .....Respondent(s)
S/o Mr. Amar Singh,
R/o 39/2 Parbhat Colony, Peer Baba Road,
Tehsil & District Jammu.
Through :- Mr. Lawanaya Sharma, Advocate
CORAM: HON'BLE MR. JUSTICE SANJEEV KUMAR, JUDGE
HON'BLE MR. JUSTICE SANJAY PARIHAR, JUDGE
JUDGMENT
(Sanjeev Kumar J)
1. The United India Insurance Company Limited ["the petitioner-
insurance company"] invokes extraordinary writ jurisdiction of
this Court, vested under Article 226 of the Constitution of India, to
set aside an order/judgment dated 18.01.2019 passed by the Jammu
& Kashmir State Consumer Disputes Redressal Commission,
Jammu ["the Commission"] in an appeal No. 4096/19 titled
"Gurcharan Singh Vs. United India Insurance Company Ltd.",
whereby the Commission has overturned the decision of District
Consumer Disputes Redressal Forum, Jammu (Constituted under J
& K Consumer Protection Act, 1987) ["the Forum"] dated
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18.12.2018 and directed the petitioner-insurance company to pay
the assessed amount of loss of 9.017 KL HSD in the accident i.e.
₹ 4,71,906/- with interest @ 7% per annum from the date of its
payment i.e. 17.08.2016 within six weeks from the date of the
order. The respondent has also been held entitled to a sum of ₹
20,000/- as litigation cost.
2. The impugned order of the Commission is assailed on multiple
grounds However, before we consider these grounds urged by
Mr. Dinesh Singh Chauhan, learned counsel appearing on behalf of
the petitioner-insurance company in support of his case set up in the
petition, we deem it appropriate to state few facts, as are germane,
to the disposal of this petition.
3. The respondent, being registered owner of an oil tanker bearing
Registration No. JK02AC-9345, took two different insurance
policies viz. „comprehensive insurance policy‟ and „Carrier‟s Legal
Liability Policy‟ from the petitioner-insurance company after
making payment of ₹ 28,812/- and ₹ 4,927/-, respectively. This is
evidenced by the Insurance Policy Nos. 1106033115P116188184
and 1106032716P106823453. The risk covered was w.e.f.
28.03.2016 to 27.03.2017 and w.e.f. 12.08.2016 to 11.08.2017. The
vehicle in question, which was loaded with 10 Kilo Liters of HSD,
departed from IOC Jalandhar on 17.08.2016 vide Challan No.
55219408 and while it was proceeding towards Srinagar, it met
with an accident at Morh Camp Bali Nalla, Udhampur. The
accident took place at about 4:30 PM on 20.08.2016. In the
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accident, not only the tanker suffered extensive damage but the
HSD loaded in the vehicle was also lost. FIR No. 271/16 was
registered at the Police Station Udhampur with regard to the
incident. The petitioner-insurance company was informed regarding
the accident and the loss occurred to the vehicle and product carried
therein. The petitioner-insurance company after registering the
claim appointed Mr. Rajesh Gupta, Surveyor for assessment of loss
caused to the vehicle and oil product carried therein. The
assessment of loss of oil product calculated was 9.017 KL out of 10
KL by the Indian Oil Corporation ["IOC"] and an amount of Rs.
4,78,744/- was paid to IOC vide a receipt dated 17.09.2016. The
respondent deposited the receipt of said payment to the petitioner-
insurance company. The petitioner-insurance company did not
settle the claim for some time and later, on 27.10.2017, rejected the
same. Faced with the rejection of the claim, the respondent filed a
complaint before the Forum seeking, inter alia, a sum of
₹ 5,78,744/- by way of indemnification of the loss caused to the
vehicle and the oil product carried therein.
4. The complaint was objected by the petitioner-insurance company
on the ground that since the respondent had violated the terms and
conditions of the policy of insurance and provisions of Motor
Vehicle Act, 1988, as such, the petitioner-insurance company was
well within its right to repudiate the claim. It was claimed that since
the tanker was not being plied in accordance with its "limitations as
to use", in that, it was carrying passengers, as such, the liability of
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the insurance company was excluded in terms of General Exception
(3) (a) of the policy condition. To elaborate, it was contended
before the Forum that the tanker was registered and insured as a
goods carrying commercial vehicle (Petrol Tanker) for carrying
petroleum products and, therefore, was not meant for carrying
passengers. However, at the time of accident, the tanker was
carrying two passengers namely Lok Nath and Preetam Chand in
addition to the driver. The parties led their respective evidences in
support of their case.
5. The Forum, after having considered the rival case in light of the
evidence on record, came to the conclusion that the vehicle in
question was comprehensively insured and it met with an accident
during the currency of insurance policy and, therefore, the
petitioner-insurance company was not expected to avoid its liability
incurred under the policy on technical grounds. The Forum also
found that the breach of contract of insurance was not a
fundamental breach so as to allow the insurance company to be
absolved of its liability to indemnify the insured.
6. Relying upon a couple of judgments from the Hon‟ble Supreme
Court, the Forum came to the conclusion that the petitioner-
insurance company, in the given facts and circumstances of the
case, was obliged to settle the claim of the respondent on "non-
standard basis". The Forum, thus, held the respondent entitled to be
indemnified by the petitioner-insurance company by a sum of
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₹ 3,52,429.50/- i.e. 75% of the liability on total loss i.e. ₹ 4,69,906/-
. The Forum vide its order dated 18.12.2018 settled the complaint.
7. Feeling aggrieved by the order of the Forum, the respondent filed
an appeal before the Commission. The petitioner-insurance
company tried to avoid its liability on the ground that the
respondent by carrying passengers in the commercial vehicle had
violated the terms and conditions of the insurance policy and,
therefore, the petitioner-insurance company was absolved of its
liability to indemnify the respondent for the loss caused during
accident.
8. The Commission, after considering the facts and circumstances of
the case, vide the order impugned dated 18.01.2019 directed the
petitioner-insurance company to pay a sum of ₹ 4,71,906/- with
interest @ 7% per annum w.e.f. the date of its payment i.e.
17.08.2016 along with litigation cost of ₹ 20,000/-. It is this order
which is called in question before us.
9. The facts in this case are not much in dispute. The vehicle in
question, which is an oil tanker carrying 10 KL of HSD, owned by
the respondent, is insured by the petitioner-insurance company by
way of two different insurance policies viz. „comprehensive
insurance policy‟ and „Carrier‟s Legal Liability Policy‟ covering the
risk w.e.f. 28.03.2016 to midnight 27.03.2017 and w.e.f. 12.08.2016
to midnight 11.08.2017. The accident, in which the oil tanker in
question got completely damaged along with loss of 9.017 KL HSD
out of 10 KL HSD contained in it, has occurred during the currency
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of the policy. The official surveyor and loss assessor Mr. Rajesh
Gupta assessed the damages caused to the vehicle on different
modes and recommended the net loss and leakage of 9.017 KL of
oil product to the tune of ₹ 4,69,906/-. On investigation and perusal
of the charge-sheet filed by the Police authorities with regard to the
accident involving the vehicle in question, it was found by the
petitioner-insurance company that at the time of accident, the
vehicle was carrying two passengers in contravention of the terms
and conditions of the policy. Keeping in view the aforesaid breach
of the policy condition, the petitioner-insurance company did not
settle the claim and ultimately made the claim "No claim". This was
not accepted by the respondent. The petitioner-insurance company
closed the claim as "No-Claim" and the decision was conveyed to
the respondent.
10. As is apparent from the reading of the order of the Forum, that the
claim was required to be settled on "non-standard basis", was
accepted. In the appeal, the award of the Forum was overturned by
the Commission. It is in these circumstances, the petitioner-
insurance company is before us in these proceedings.
11. It is contended by Mr. Chauhan that the award passed by the Forum
was correct and in consonance with the settled legal position and
that the judgment passed by the Commission, impugned in this
petition, is contrary to law and deserves to be set aside.
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12. Having heard learned counsel for the parties and perused the
material available on record, we find that the questions which
need determination in this petition can be put as under:
i. Whether the insurance company can repudiate the claim of
the insured for indemnification of the loss caused to the
insured vehicle on the ground of breach of any term or
condition of the insurance policy?
and
ii. Whether the insurance company is well within its right to
settle the claim on "non-standard basis" where the breach
of a term and condition of the insurance policy is not
fundamental?
13. The answer to the questions aforesaid is not far to seek. The issue
has already been dealt with by the Hon‟ble Supreme Court in its
latest judgment rendered in the case of Ashok Kumar Vs. New
India Assurance Co. Ltd. [Civil Appeal No. 4758/2023] decided
on 31.07.2023, approving its view in the case of National
Insurance Company Limited Vs. Nitin Khandelwal, [(2008) 11
SCC 259] and Amalendu Sahoo Vs. Oriental Insurance
Company Limited, [(2010) 4 SCC 536]. It is held that where there
is contributory factor, proportionate sum from the assured amount
would be all that the insurance company can aspire to deduct.
Para(s) 18 and 19 of the judgment are relevant and, therefore, set
out below:
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".....18 In Amalendu Sahoo (supra), this Court noticed the guidelines
issued by the New India Assurance Co. Ltd. in settling claims
on non-standard basis. The guidelines read as under:
Sl. No. Description Percentage of settlement
(i) Under declaration of Deduct 3 years‟ difference in
licensed carrying capacity. premium from the amount of
claim or deduct 25% of claim
amount, whichever is higher.
(ii) Overloading of vehicles Pay claims not exceeding
beyond licensed carrying 75% of admissible claim.
capacity.
(iii) Any other breach of Pay up to 75% of admissible
warranty/condition of claim.
policy including limitation
as to use.
The above guidelines were followed by this Court in Amalendu
Sahoo (supra) as is clear from para 14 of the said judgment.
The District Forum and the State Commission have rightly
applied Amalendu Sahoo (supra) to the facts of the present
case and awarded 75% on non-standard basis.
.....19 Nitin Khandelwal (supra) and Amalendu Sahoo (supra) lay
down the correct formula that where there is some contributory
factor, a proportionate deduction from the assured amount
would be all that the Insurance Company can aspire to deduct.
We are inclined to accept the plea of the appellant that in the
case at hand, on the facts governing the scenario, Clause (iii)
of the table set out in para 14 of Amalendu Sahoo (supra) is
attracted and the District Forum and the State Commission
were justified in awarding the entire 75% of the admissible
claim."
14. The issue was considered by the Hon‟ble Supreme Court in the case
of Jitendra Kumar Vs. Oriental Insurance Co. Ltd. & Anr.
[(2003) 6 SCC 420]. In paragraphs 9 & 10 of the judgment, the
Hon‟ble Supreme Court held thus:
".....09 The question then is; can the Insurance Company 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
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vehicle who had nothing to do with the accident did not hold a
valid licence? The answer to this question, in our opinion,
should be in the negative. Section 149 of the Motor Vehicles
Act, 1988 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 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 doe not hold a valid driving licence is responsible
in any manner. It does not empower 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.
damaged incurred due to reasons other than the act of the
driver.
.....10 It is the case of the parties that the fire in question which
caused damage to the vehicle occurred due to mechanical
failure and not due to any fault or act, or omission of the
driver. Therefore, in our considered opinion, the Insurance
Company could not have repudiated the claim of the
appellant."
15. This was the view followed by the Hon‟ble Supreme Court in the
later judgment passed in Nitin Khandelwal (supra). The issue came
up for consideration, yet again, before the Hon‟ble Supreme Court
in Amalendu Sahoo (supra), wherein the Hon‟ble Supreme Court
took note of guidelines issued by insurance company about settling
cases where there is element of contributory negligence on "non-
standard basis". Para(s) 14, 15 and 16 of the judgment are
reproduced herein below:
".....14 In this connection reference may be made to a decision of the
National Commission in the case of New India Assurance Co.
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Ltd. Vs. Narayan Prasad Appaprasad Pathak, (2006) CPJ 144
(NC). In that case also the question was whether the insurance
company can repudiate the claims in a case where the vehicle
carrying passengers and the driver did not have a proper
driving licence and met with an accident? While granting the
claim on non-standard basis the National Commission set out
on its judgment the guidelines issued by the insurance company
about settling all such non-standard claims. The said
guidelines are set out below:
Sr No. Description Percentage of settlement
(i) Under declaration of Deduct 3 years‟ difference in
licensed carrying capacity premium from the amount of
claim or deduct 25 per cent of
claim amount, whichever is
higher.
(ii) Overloading of vehicles Pay claims not exceeding 75
beyond licensed carrying per cent of admissible claim.
capacity
(iii) Any other breach of Pay up to 75 per cent of
warranty/condition of admissible claim.
policy including limitation
as to use.
.....15 From a perusal of the aforesaid guidelines it is clear that one
of the cases where 75 per cent claim of the admissible claim
was settled was where condition of policy including limitation
as to use was breached.
.....16 In the instant case the entire stand of the insurance company is
that claimant has used the vehicle for hire and in the course of
that there has been an accident. Following the aforesaid
guidelines, this court is of the opinion that the insurance
company cannot repudiate the claim in toto."
16. The legal position as adumbrated in Nitin Khandelwal (supra) and
Amalendu Sahoo (supra) has been consistently followed by the
Hon‟ble Supreme Court in its later judgments as also in various
judgments rendered by this Court. It is, thus, a trite law that the
principle of "non-standard basis" to settle the insurance claim can
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be applied to the cases where condition of policy including
"limitation as to use" is found breached by the insured. It is equally
well settled that if breach of insurance policy condition is
fundamental in nature, the insurance company would be absolved of
its liability to indemnify the insured.
17. In a given case, what is required to be determined is whether the
breach of policy condition alleged by the petitioner-insurance
company to repudiate the insurance claim is a breach of
fundamental condition or an ancillary condition. In case, the breach
is of the fundamental condition of the contract of the insurance
which is in the nature of contract of indemnity, the insurance
company would be well within its right to wriggle out of his
liability of indemnification. However, the trivial breach of an
ancillary condition would not absolve the insurance company of its
liability to indemnify the insured. In such a case, the guidelines
issued by the insurance company to settle the claims on "non-
standard basis" would be applicable. In case, the breach is of the
warranty or condition of policy including "limitation as to use", the
claim is to be settled by making payment of up to 75% of the
admissible claim.
18. The reliance placed by the Commission on the judgment of Hon‟ble
Supreme Court in the case of B.V. Nagaraju (supra) may not be
inappropriate, however, having regard to the evolution of law on the
subject since 1996 when the judgment in B.V. Nagaraju (supra)
was rendered, it is now well settled that if the breach of policy
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condition has not directly or indirectly contributed to the accident in
which the insured vehicle is damaged, such condition is required to
be taken as an ancillary condition of contract of indemnity and the
breach thereof shall not absolve the insurance company of its
liability to indemnify the insured for the damage caused to such
vehicle in the accident. However, if breach of such ancillary
condition is pleaded and proved by the insurance company, it can
plead for settlement of the claim on "non-standard basis". The
formula of "non-standard basis" which was reproduced in the
judgment of Amalendu Sahoo (supra) has been accepted with
approval by the Hon‟ble Supreme Court in several judgments.
However, if the breach of the condition of contract of insurance is
fundamental and has directly or indirectly contributed to the
accident, the insurance company would be well within its right to
repudiate the claim and get itself absolved of the liability to
indemnify the insured.
19. In the instant case, there was a breach of condition of policy as to
the use of vehicle. The vehicle in question was admittedly an oil
tanker (a commercial vehicle) and, therefore, the insured was not
entitled to carry passengers. At the time of accident, there were two
gratuitous passengers travelling in the vehicle and, therefore, there
was a breach of condition as to use of the vehicle. It has, however,
not come on record by way of evidence or otherwise that these two
passengers who were sitting in the oil tanker contributed, in any
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manner, or were responsible for the accident in which the oil tanker
was totally damaged and the product carried therein was destroyed.
20. In view of the aforesaid admitted position emerging from the
material on record, we are of the considered opinion that the award
passed by the Forum is in consonance with law, whereas, the order
impugned passed by the Commission does not reflect correct
position of law.
21. For the foregoing reasons, we allow this petition and quash the
impugned order and judgment dated 18.01.2019 passed by the
Commission. The judgment passed by the Forum dated
18.12.2018 is upheld.
(Sanjay Parihar) (Sanjeev Kumar)
Judge Judge
JAMMU
16.10.2025
Manan
Whether the order is speaking : Yes
Whether the order is reportable : Yes
