Case Title: CANARA BANK vs. UNITED INDIA INSURANCE CO. LTD
Summary
The Supreme Court has ruled that beneficiaries of the policy purchased by the insured are considered “consumers” under the Consumer Protection Act. The case involved agricultural products stored in a cold storage facility operated by Sreedevi Cold Storage. The insurance company denied the farmers’ claim, arguing that there was no privity of contract between the insurer and the farmers.
However, the Supreme Court ruled that the definition of ‘consumer’ is broad, encompassing not only the individual who hires or avails of services but also the beneficiary of such services. The court determined that the insurance company is obligated to indemnify the cold store for the value of the goods as stated in the policy, and as beneficiaries, the farmers are entitled to receive the full amount payable as per the policy terms.
About the case
Even if they are not parties to the insurance contract, the beneficiaries of the policy purchased by the insured are considered “consumers” under the Consumer Protection Act, according to the Supreme Court.
The agricultural products in question were stored in a cold storage facility operated by a partnership firm known as Sreedevi Cold Storage. United India Insurance Company Limited provided insurance coverage for this cold storage company. Farmers’ complaints regarding the insurance company’s denial of the cold store’s claim were addressed by the State and National Consumer Forums, which granted relief. The insurance company’s appeal argued that there was no privity of contract between the insurer and the farmers due to the fact that the policy was purchased by the cold store and not the farmers; consequently, the farmers cannot be considered “consumers.
“The bench of Justices S. Abdul Nazeer and Deepak Gupta, with reference to the definition of ‘consumer’ in Section 2(d) of the Act, observed that the Act’s definition of consumer is extremely broad, encompassing not only the individual who hires or avails of the services for consideration but also the beneficiary of such services, who may be an individual other than the agency user or recipient. Declared it:
“(2) Consumer is defined in two parts pursuant to Section 2(d) cited above. Section 2(1)(d) pertains to subclause (i), which encompasses not only the purchaser but also any user of the purchased goods, provided that the usage is authorized by the purchaser. Hence, the initial provision of the definition of “consumer” encompasses not only the purchaser but also any user of the products, provided that such usage is authorized by the purchaser. We consider the definition of the consumer to be considerably broader with regard to the hiring or utilization of services. Within this particular segment, the term “consumer” encompasses not solely the individual who has engaged the services or employed them, but also any individual who has benefited from them.
Consequently, while an insured may be defined as an individual who contracts or utilizes the insurance company’s services, the beneficiaries of those services could include a wealth of others. Belonging of the beneficiaries to the insurance contract is not an absolute requirement. While not technically considered consumers due to their status as beneficiaries of the policy purchased by the insured, they are not considered such merely by virtue of being parties to the insurance contract.
The bench concluded, based on this observation, that the term ‘consumer’ encompasses beneficiaries who are eligible to receive the insurance benefits obtained by the insured. It was further stated that the Consumer Protection Act expressly designates as a consumer any recipient of the services, excluding the insured.
In its denial of the insurance company’s appeal, the court determined that the insurance company is obligated to indemnify the cold store for the value of the goods as stated in the insurance policy. Furthermore, as the beneficiaries, the farmers are entitled to receive the full amount payable as per the terms of the policy.
