- Bookmark
- Share
- CaseIQ
Chief Executive Offi... v. Haji Daud Haji Harun...
Factual and Procedural Background
The Gujarat Maritime Board (“the appellant”) financed the purchase of the vessel “Chandra Vasa” for one Shri Ramesh Chandra Gordhandas Faldu, advancing a loan of Rs 11,25,000 and taking a mortgage over the vessel. In 1982, Faldu sold the vessel to Shri Haji Daud Haji Harun Abu (“the complainant”) for Rs 3,00,000.
While voyaging from Dubai to Bombay in June 1987, the vessel sank during a hurricane. It had been insured with United India Insurance Co. Ltd. (“the insurer”). The insurer repudiated the claim on the ground that Haji Abu lacked an insurable interest. Haji Abu filed a consumer complaint before the National Consumer Disputes Redressal Commission (“the Commission”).
On 12-1-1995 the Commission found deficiency of service on the part of the insurer and directed payment of Rs 13 lakhs with 18 % interest to Haji Abu. Although the Commission noted correspondence showing the appellant’s mortgage interest, the appellant was not a party to those proceedings.
After learning of the award, the appellant moved the Commission, asserting its mortgagee rights and relying on an assignment clause in the finance agreement. The Commission initially stayed execution (30-10-1995) but, by order dated 14-6-1996, reaffirmed that the entire insurance amount be paid to Haji Abu, advising the appellant to pursue other legal remedies. The appellant appealed this order.
Legal Issues Presented
- Whether the Commission erred in directing the entire insurance proceeds to the purchaser without issuing notice to, or adjudicating the claim of, the mortgagee–appellant.
- Whether, under the Consumer Protection Act, 1986, the Commission possesses incidental or ancillary jurisdiction to determine rival claims to the same insurance money within a consumer complaint.
Arguments of the Parties
Appellant (Gujarat Maritime Board)
- Invoked clause 10 of the finance agreement requiring the borrower to insure the vessel and assign the policy in favour of the Director of Ports (now represented by the appellant).
- Pointed to an endorsement on the insurance policy reflecting the assignment, entitling the appellant to the insurance amount, in whole or in part.
- Contended that the Commission’s award, made without hearing the mortgagee, was unsustainable.
First Respondent (Haji Daud Haji Harun Abu)
- Through counsel Mr Dushyant Dave, questioned whether the Commission had jurisdiction under the Consumer Protection Act to decide inter se disputes between the complainant and a third party (the appellant) regarding entitlement to the insurance proceeds.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Khyerbari Tea Co. Ltd. v. State of Assam, AIR 1964 SC 925 | When a statute confers a substantive power, all incidental and ancillary powers necessary to exercise that power are implied. | Used to support the view that the Commission, having jurisdiction to adjudicate the consumer complaint, also has incidental power to decide rival claims to the relief sought. |
Court's Reasoning and Analysis
The Court observed that the Commission was aware of the appellant’s mortgagee interest, yet failed to issue notice before ordering payment to Haji Abu. Clause 10 of the finance agreement and the corresponding endorsement on the insurance policy explicitly assigned the insurance proceeds to the appellant. Consequently, the Commission should have determined whether the appellant was entitled to all or part of the proceeds.
Addressing the jurisdictional objection, the Court held that Sections 21 and 22 of the Consumer Protection Act confer upon the Commission powers analogous to a civil court, thereby implying authority to resolve incidental or ancillary disputes—such as competing claims to insurance money—essential for effective adjudication of the consumer complaint. The doctrine that enabling legislation carries with it all powers indispensable to fulfil its purpose, as recognised in Khyerbari Tea, was invoked.
Because the Commission neither heard the appellant nor examined the contractual assignment, its order was legally flawed.
Holding and Implications
Appeal Allowed; Orders of the National Commission Set Aside; Matter Remitted for Fresh Disposal.
Direct Effect: The National Commission must rehear the complaint, issue notice to the appellant, and adjudicate entitlement to the insurance proceeds in light of the finance agreement and policy endorsement. No costs were awarded.
Broader Implications: The judgment affirms that consumer fora possess incidental powers to resolve rival claims necessary to grant effective relief, reinforcing their status as quasi-judicial bodies with civil-court powers under the Consumer Protection Act, 1986.
B.P Jeevan Reddy, J.— This appeal is preferred by the Gujarat Maritime Board against the order dated 14-6-1996 passed by the National Consumer Disputes Redressal Commission rejecting the objections filed by the appellant.
2. The appellant had provided finance to one Shri Ramesh Chandra Gordhandas Faldu for purchasing a vessel, “Chandra Vasa”. The amount of loan provided was Rs 11,25,000. The vessel was mortgaged in favour of the appellant (as a successor to the Director of Ports, Government of Gujarat). In the year 1982, Ramesh Chandra sold the said vessel to the first respondent, Shri Haji Daud Haji Harun Abu, for a sum of Rs 3,00,000.
3. In June 1987 the said vessel, on its voyage from Dubai to Bombay, was caught in a hurricane and sank at sea. The vessel was insured with the United India Insurance Company Limited, the third respondent in this appeal. When Haji Daud laid a claim for the insurance amount, the insurance company refused to pay the amount to him on the ground that he has no insurable interest in the vessel, whereupon Haji Abu laid a complaint before the National Consumer Commission. The Commission recorded the following findings in its order dated 12-1-1995:
“Though the complainant claims to have paid the consideration of Rs 3 lakhs in full, he was unable to produce the stamped receipt in token of having paid the balance consideration of Rs 2 lakhs to the owner of the vessel. The ownership of the vessel was registered with the Gujarat Maritime Board, Gujarat. According to the Maritime Board, the purchaser Shri Haji Harun Abu was only an administrator of the vessel but not the owner of the vessel.
The insured had paid the amount of consideration of Rs 3 lakhs in full: Rs 1 lakh as earnest money deposit and the balance of Rs 2 lakhs by way of bank draft. He has however, not been able to produce the receipt in support of the payment of Rs 2 lakhs. It is, however, not clear to us as to how the opposite party can maintain that the complainant had no insurable interest in the vessel and that therefore, no liability could arise under the policy of insurance. It was the duty of the insurance company to have verified the title of the insured at the time of insuring the vessel and issuing the policy of insurance. This was not a matter in the special and exclusive knowledge of the insured only. The proposer for insurance could have easily asked to produce his title to the vessel which he was getting insured by payment of premium from time to time.
The agreement of sale is between the registered owner of the vessel and the purchaser, i.e, the complainant before us. It appears that the title in this property was not transferred in the name of the complainant inasmuch as the mortgagee also had an interest in the property along with the purchaser. The possession of the vessel and its custody was with the complainant. In fact it is seen from the communication of 25th September, 1992 by the Gujarat Maritime Board to the insurance company that the insured was considered by the Board as an administrator and averred that the insurance amount should be paid only to the Maritime Board.”
(emphasis supplied)
(The appellant-Board was not a party to the proceedings at this stage.)
4. Having recorded the said findings, the Commission yet found that the complainant/insurer was “the de facto owner of the vessel” that he was in possession of the vessel and had insured it with the third respondent and that no other person had laid a claim for the insurance amount. On that basis, it concluded:
“From the totality of these facts, there is no doubt that the complainant has insurable interest in the property and the repudiation or non-payment of the claim on the ground that the insured had no insurable interest was not correct, fair or proper. In the result, there has been deficiency of service on the part of the insurance company. We therefore, accept the petition and direct that the opposite party — insurance company shall pay to the insured the amount due under the policy of insurance viz., Rs 13 lakhs with interest @ 18% p.a from the date of expiry of four months from the date on which the claim was lodged with the insurer, viz., the United India Insurance Co. Ltd. The complainant is allowed Rs 2500 as costs.”
5. When the appellant-Board came to know of the said order, it filed an application before the Commission stating that inasmuch as it was the mortgagee and assignee of the said vessel to the knowledge of the Commission, the direction to pay the entire insurance amount to Haji Abu is unsustainable in law. On the said application the Commission stayed (vide order dated 30-10-1995) its earlier order dated 12-1-1995 and issued notice on the said application to the respondents therein. On 14-6-1996, however, the Commission passed a short order directing that the entire insurance amount be paid to Haji Abu, leaving the appellant to adopt such remedies as are open to it in law.
6. The first order of the Commission dated 12-1-1995 clearly shows that the fact that the appellant had an interest in the vessel as a mortgagee was clearly brought to the notice of the Commission. Indeed, the Commission also refers to a letter written by the appellant to the insurance company that it alone is entitled to the entire insurance amount. Yet, it appears rather curious that it did not think it appropriate to issue a notice to the appellant and directed the entire insurance amount to be paid to the complainant Haji Abu. Even when the appellant came forward with its claim and objections, the Commission affirmed its earlier order observing that the appellant may adopt such remedies as are open to it in law.
7. Shri S.P Gusain, Chief Executive Officer and Vice-Chairman of the appellant-Board, brought to our notice, clause 10 of the Finance Agreement between the appellant and Ramesh Chandra. It reads:
“Immediately on mechanising a sailing vessel the borrower shall take out a comprehensive Risk Insurance Policy for the mechanised vessel as per Rule 23 of the Rules, at his cost and shall assign the policy in favour of the Director of Ports representing the Government of Gujarat.”
We have also seen the insurance policy taken out by Haji Abu. It clearly contains an endorsement in terms of clause 10 of the Finance Agreement. In this view of the matter we are of the opinion that the Commission was not justified in directing the entire insurance amount to be paid to the insurer and in directing the appellant to adopt such remedies as are open to it in law. The Commission should have gone into the question whether the appellant is entitled to the whole or part of the insurance amount in terms of the aforesaid agreement and the insurance policy.
8. Mr Dushyant Dave, learned counsel for the first respondent, raised a doubt whether the Commission has the jurisdiction to go into and decide the rival claims of the appellant and Haji Abu in a complaint filed under the Consumer Protection Act, 1986. In our opinion such a power must be held available to the Commission as a power incidental or ancillary to the substantive power conferred upon the Commission by the Act. Section 21 deals with the jurisdiction of the National Commission. Insofar as is relevant, it reads:
“21. Jurisdiction of the National Commission.—Subject to the other provisions of this Act, the National Commission shall have jurisdiction,—
(a) to entertain,—
(i) complaints where the value of the goods or services and compensation, if any, claimed exceeds rupees (twenty lakhs); and.”
This provision has to be read along with Section 22 which clothes the Commission with the powers of a civil court specified in sub-sections (4), (5) and (6) of Section 13 and the several powers specified in clauses (a) to (i) of sub-section (1) of Section 14. It would be appropriate to read the aforesaid provisions here:
“22. Power of and procedure applicable to the National Commission.—The National Commission shall, in the disposal of any complaints or any proceedings before it, have —
(a) the powers of a civil court as specified in sub-sections (4), (5) and (6) of Section 13;
(b) the power to issue an order to the opposite party directing him to do any one or more of the things referred to in clauses (a) to (i) of sub-section (1) of Section 14,
and follow such procedure as may be prescribed by the Central Government.
13. (4) For purposes of this section, the District Forum shall have the same powers as are vested in civil court under the Code of Civil Procedure, 1908 (5 of 1908), while trying a suit in respect of the following matters, namely,—
(i) the summoning and enforcing attendance of any defendant or witness and examining the witness on oath;
(ii) the discovery and production of any document or other material object producible as evidence;
(iii) the reception of evidence on affidavits;
(iv) the requisitioning of the report of the concerned analysis or test from the appropriate laboratory or from any other relevant source;
(v) issuing of any commission for the examination of any witness; and
(iv) any other matter which may be prescribed.
(5) Every proceeding before the District Forum shall be deemed to be judicial proceeding within the meaning of Sections 193 and 228 of the Indian Penal Code (45 of 1860), and the District Forum shall be deemed to be a civil court for the purposes of Section 195, and Chapter XXVI of the Code of Criminal Procedure, 1973 (2 of 1974).
(6) Where the complainant is a consumer referred to in sub-clause (iv) of clause (b) of sub-section (1) of Section 2, the provisions of Rule 8 of Order I of the First Schedule to the Code of Civil Procedure, 1908 (5 of 1908) shall apply subject to the modification that every reference therein to a suit or decree shall be construed as a reference to a complaint or the order of the District Forum thereon.
14. Finding of the District Forum.—(1) If, after the proceeding conducted under Section 13, the District Forum is satisfied that the goods complained against suffer from any of the defects specified in the complaint or that any of the allegations contained in the complaint about the services are proved, it shall issue an order to the opposite party directing him to (do) one or more of the following things, namely,—
(a) to remove the defect pointed out by the appropriate laboratory from the goods in question;
(b) to replace the goods with new goods of similar description which shall be free from any defect;
(c) to return to the complainant the price, or, as the case may be, the charges paid by the complainant;
(d) to pay such amount as may be awarded by it as compensation to the consumer for any loss or injury suffered by the consumer due to the negligence of the opposite party;
(e) to remove the defects or deficiencies in the services in question;
(f) to discontinue the unfair trade practice or the restrictive trade practice or not to repeat them;
(g) not to offer the hazardous goods for sale;
(h) to withdraw the hazardous goods from being offered for sale;
(i) to provide for adequate costs to parties.”
9. It is also relevant to notice that the Act defines the expressions ‘complainant’ and ‘consumer’ as also the expression “consumer dispute” and that Section 24 invests the orders of the Commission with finality.
10. The jurisdiction of the Commission to entertain and decide complaints necessarily means that where plurality of persons claim the same relief, simultaneously disputing each other's right to claim the said relief, the Commission has the necessary power to adjudicate the rival claims and decide the said dispute also. This power flows from and is incidental and ancillary to the substantive power conferred by Section 21(a)(i) read with Section 22 which applies sub-sections (4), (5) and (6) of Section 13 to the National Commission as well. It is well settled that where a substantive power is conferred upon a court or tribunal, all incidental and ancillary powers necessary for an effective exercise of the substantive power have to be inferred. See Khyerbari Tea Co. Ltd. v. State of Assam AIR 1964 SC 925 (AIR at p. 935). The rule as quoted in Craies is:
“One of the first principles of law with regard to the effect of an enabling Act is that if a legislature enables something to be done, it gives power at the same time by necessary implication to do everything which is indispensable for the purpose of carrying out the purposes in view.”
11. For the above reasons, this appeal is allowed, the impugned orders of the Commission are set aside and the matter is remitted to the Commission for a fresh disposal of the matter according to law. No order as to costs.
12. We make it clear that we may not be understood to have expressed any opinion on the merits of the case of either party. The observations made hereinabove merely constitute reasons for this order and not findings on the claims of the respective parties.
Alert