Court’s Decision
The Kerala High Court allowed the writ petition filed by the insurance company and set aside the award passed by the Insurance Ombudsman, which had directed payment of ₹20,00,000/- to a complainant on a marine cargo policy. The Court held that the Ombudsman lacked jurisdiction under the Redressal of Public Grievances Rules, 1998 to entertain complaints arising from policies taken by proprietary concerns, as such policies were not considered to be taken on “personal lines”.
Facts
The first respondent transported 1,657 metric tons of soda ash from Porbandar Port to Mangalore Port under a marine cargo specific voyage policy dated 15.06.2012. Due to rough seas and adverse weather, the vessel was diverted to Beypore Port, where 114.50 metric tons of the cargo was found damaged by seawater ingress. The insurance company rejected the claim of ₹23,56,066/-. Aggrieved by this, the complainant approached the Insurance Ombudsman.
The insurer contested the maintainability of the complaint, arguing that the policy was issued to a partnership firm and thus outside the Ombudsman’s jurisdiction. Despite this, the Ombudsman passed an award on 14.10.2015, directing payment of ₹20,00,000/-.
Issues
- Whether the Insurance Ombudsman had jurisdiction to entertain a complaint pertaining to a marine cargo policy taken by a proprietary concern?
- Whether such a policy could be considered a “personal line” policy under the Redressal of Public Grievances Rules, 1998?
- Whether consent to mediation by the insurer constituted a waiver of jurisdictional objections?
Petitioner’s Arguments
The insurer argued that the Redressal of Public Grievances Rules, 1998 confined the Ombudsman’s jurisdiction to complaints regarding insurance policies taken on “personal lines” by individuals. They contended that the policy in question was issued to a firm (either partnership or proprietary) on commercial lines, and thus, fell outside the ambit of Rule 13. Relying on Rule 4(i) and 4(k), the petitioner emphasized that only individuals who took policies in their personal capacity were eligible to approach the Ombudsman.
Further, they contended that the Ombudsman had erred in assuming jurisdiction merely because the company had agreed to mediation. It was submitted that under Rule 12(1) and 12(2), adjudication and mediation were distinct, and agreeing to mediation did not amount to waiving jurisdictional objections.
They also placed reliance on prior decisions, notably:
- National Insurance Co. Ltd v. Indus Motor Company Pvt. Ltd., [2005 (4) KLT 391] — where a Division Bench of the Kerala High Court held that incorporated companies do not fall within the definition of “insured person” under the Rules.
- Bajaj Allianz General Insurance Co. Ltd. v. Puthen Modern Rice Mill, [2021 (2) KLT 640] — where a Single Judge held that partnership firms are excluded from filing complaints under the Rules.
Respondent’s Arguments
The respondent argued that it was a proprietorship concern, not a partnership or company, and hence the policy was taken by an individual in a personal capacity. Relying on judgments of the Supreme Court (Ashok Transport Agency v. Awadhesh Kumar [(1998) 5 SCC 567] and Raghu Lakshminarayanan v. Fine Tubes [(2007) 5 SCC 103]), the counsel submitted that a proprietorship concern is only a business name under which an individual conducts business, and therefore, the policy taken in such name is in substance a personal policy.
They also pointed out that the insurer had been issuing policies to the respondent over time and was aware of the respondent’s status as a proprietorship. The Ombudsman had rightly noted that there was evidence supporting the respondent’s status as a proprietary concern, and no contrary evidence had been presented.
Analysis of the Law
The Court carefully examined the Redressal of Public Grievances Rules, 1998, especially Rules 4(i), 4(k), 12, and 13. Rule 4(i) defines “insured person” as an individual by whom or on whose behalf an insurance policy has been taken on personal lines. Rule 4(k) defines “personal lines” as insurance policies taken or given in an individual capacity. Rule 13(1) provides that “any person” with a grievance may make a complaint either himself or through legal heirs.
The Court clarified that although there was no express exclusion of entities like proprietorships in the Rules, a holistic reading revealed a clear legislative intent to restrict jurisdiction to grievances concerning personal insurance policies of individuals.
The Court found that although proprietorships are treated as synonymous with their owners under procedural laws like the Code of Civil Procedure, the Redressal of Public Grievances Rules are special rules that must be interpreted in the context of their object—resolving small, individual insurance claims quickly and summarily. The scheme did not contemplate adjudication of commercial disputes involving business entities.
Precedent Analysis
The Court heavily relied on:
- National Insurance Co. Ltd. v. Indus Motor Company Pvt. Ltd. [2005 (4) KLT 391]: The Division Bench held that incorporated companies are not included within the ambit of the expression “insured person” or “any person” under Rule 13 of the 1998 Rules.
- Bajaj Allianz General Insurance Co. Ltd. v. Puthen Modern Rice Mill [2021 (2) KLT 640]: It extended the above reasoning to partnership firms.
The Court distinguished the Supreme Court cases cited by the respondent (Ashok Transport Agency and Raghu Lakshminarayanan) by noting that those were delivered in the context of the Civil Procedure Code and could not be used to interpret a specialised administrative redressal mechanism meant for individual policyholders.
Court’s Reasoning
The Court held that while the respondent may be a proprietary concern, the policy in question was not taken in an individual capacity but in the course of commercial business, i.e., for transporting bulk cargo. The commercial nature of the transaction precluded the characterization of the policy as a “personal line” policy.
Moreover, the Court observed that the Ombudsman had misunderstood the Rules and had erroneously relied on IRDA’s website rather than the statutory definitions. The Ombudsman also incorrectly interpreted the insurer’s willingness for mediation as a waiver of objections on jurisdiction.
The distinction between mediation and adjudication, as reflected in Rules 12(1) and 12(2), was emphasized by the Court to reinforce that an offer for mediation does not validate a claim for adjudication.
Conclusion
The Kerala High Court held that the Insurance Ombudsman had no jurisdiction to entertain the complaint in question, as it did not relate to a policy taken on personal lines by an individual. Accordingly, the award passed by the Ombudsman on 14.10.2015 was set aside, and the writ petition was allowed.
Implications
This ruling narrows the scope of jurisdiction of the Insurance Ombudsman by reaffirming that policies issued to proprietary concerns—even though such concerns are legally not distinct from individuals—cannot be treated as “personal lines” insurance for the purposes of the Redressal of Public Grievances Rules. It clarifies that commercial policies, regardless of the claimant’s form of business, are to be excluded from the summary redressal mechanism under the Rules.
This decision will be particularly relevant for insurers and proprietors alike, reinforcing the boundary between business claims and individual insurance grievances.
Judgments Cited
- National Insurance Co. Ltd. v. Indus Motor Company Pvt. Ltd. [2005 (4) KLT 391] — Held that companies cannot be considered “insured persons” under the 1998 Rules.
- Bajaj Allianz General Insurance Co. Ltd. v. Puthen Modern Rice Mill [2021 (2) KLT 640] — Held that partnership firms are not “insured persons” under the Rules.
- Ashok Transport Agency v. Awadhesh Kumar [(1998) 5 SCC 567] — Distinguished; held that proprietorships are not separate legal entities under CPC.
- Raghu Lakshminarayanan v. Fine Tubes [(2007) 5 SCC 103] — Followed the above, but found inapplicable to the 1998 Rules.
FAQs
1. Can a proprietary concern file a complaint before the Insurance Ombudsman under the 1998 Rules?
No. The Kerala High Court held that even though a proprietorship concern is legally not distinct from the individual, policies taken for commercial purposes in the name of such concerns do not qualify as “personal lines” and are outside the Ombudsman’s jurisdiction.
2. Does agreeing to mediation before the Insurance Ombudsman imply that a party accepts its adjudicatory jurisdiction?
No. The Court clarified that mediation and adjudication are distinct functions under the Rules, and agreeing to mediation does not bar a party from objecting to jurisdiction for adjudication.
3. Are commercial insurance policies covered under the Ombudsman’s redressal mechanism?
No. The Rules specifically contemplate grievances arising from personal insurance policies only, such as mediclaim or accident policies taken in an individual capacity. Commercial insurance disputes are excluded.
