LexN. R. SRINIVASA IYER versus NEW INDIA ASSURANCE CO., LTD.
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
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N. R. SRINIVASA IYER
Vj
NEW INDIA ASSURANCE CO., LTD.
July 22, 1983
[D, A. DESAI AND 0. CHINNAP~A REDDY, JJ.J
Cpntract Act-S. 148 Contract of insurance-When custody of1notor car
da111aged in accident is entrusted to repairer by insured in accordance with tei·111s
of insufa11ce policy, does the i11Surer becon1e 'bailee' and repairer •sub-bailee' of
niotor ccir?
The appellant's. motor car, insured with the respondent ('insurer')
suffered damage in an acCident and was taken to and left in the custody of
a repairer. On receipt of intimation of the accident, the insurer entered into
correspondence with the rep:i.irer, accepted the estimate of repair charges and
advised the repairer to proceed witli the repairs. The motor car was, however,
destroyed in a fire which occurred in the repair_er's workshop. The appellant.
filed a suit claiming from the insurer the value of the motor car on the footing
that the insurer was the bailee of the motor car while it was in the custody of
the repairer.
The trial court upheld the contention of the appellant and decreed the
suit but, in appeal, the High Court set aside the decree and diSmissed the suit
on a ground not related to the contention based on the contract of bailment.
In Civil Appeal No, 142 of 1965 decided on October 31, 1967 this Court allowed
the appeal of the appellant and remitted the same to the High Court requestina
it to deal with the following questions : (i) whether the insurer was a bailee of
the motor car; (ii) Whether the insurer failed to take as n1uch care of the car
as a person of ordinary prudence would in similar circumstances; and (iii) The
value of the destroyed car. 1he High Court held on the basis of the corres-
pondence between the parties that the car was ~ntrusied to the repairer by the
apPellant's son on behalf of the appellant, that this was done without reference
to the insurer, that the insurer had only agreed to pay the repair charges and
that therefore the insurer was n.ot a bailee of the motor car.
Allowing the appeal,
HELD: 1. A bare perusal of some of the conditions contained in the
contract of insurance would unmistakably lead to the conclusion that the
insurer was a bailee of the motor car. The custody of the repairer was that of.
a sub-bailee. The High Court went wrong in not making any reference to the
contract' of insurance between the parties. In a co9tract of in~urance, there
are mutual rights and obligations both of the insurer and the insured. If the
motor car is damaged in an accident, a duty is cast on the insured not to leave
the damaged car unattended which of necessity would oblige the insured either
to keep a watchman or if the car is in a condition to be moved it o~ght to be
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SUPREME COURT REPORTS
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taken to a repairer, ind the insurer undertake:; an obligation to reitnburse tbc
cost of removal to the insured. This would imply that from the scene of the
accident, it is the duty of the insurer to remove the car to the n·earest repairer
but this duty is to be performed by the insured on behcllf of the insurer.
Another important condition of the contract is that, once the car is damaged
in an accident, the insurer may, at its own option, either repair, reinstate or
replace the motor car. When the insurer has the option to replace the n1otor
car, it can take over tQe damaged car and the insured is bound to subn1it to the
samt}. If the insurer, on ~he other hand, exercises the option of repairing the
car, it is entitled not merely to choose the repairer but also to detern1ine the
charges for repairs to be settled between the insurer and the repairer and the
insured has hardly anything to do with it. [486A, 487 C-D, 488. C-Dj
Moris v. C. W. Martin & Sons, Ltd., [1965] 2 All E.R. 725; and Gilchrist
Watt and Sanderson Pty Ltd. v. York Products Ltd., [1970] 3 All E. R, 825;
referred to.
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In the instant case, when the appellant's son soon after the accid~nt took
the dan1agcd car to the nearest repairer, the car virtually can1e into the custody
of the insurer and the repairer took the cu5.tody for and on behalf of the
insurer. The obligation to get the car repaired was that of the insurer. The
insurer formally took the car into its custody \Vhen it accepted the repairer to
whon1 the custody was given and ent.3red inlo negotiations about t4e repair
charges and finally agreed to pay the repair charges to the repairer.
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