Law of Torts: Recent Judgement

CIVIL APPEAL NO.3594-3611 of 2010
Civil Appeal No.3630 of 2010, Civil Appeal No.3631 of
Civil Appeal No.3647 of 2010, Civil Appeal No.3632 of
Civil Appeal No.3633 of 2010, Civil Appeal No.3634 of
Civil Appeal No.3635 of 2010, Civil Appeal No.3636 of
Civil Appeal No.3638 of 2010, Civil Appeal No.3646 of
Civil Appeal No.3639 of 2010, Civil Appeal No.3640 of
Civil Appeal No.3641 of 2010, Civil Appeal No.3642 of
Civil Appeal No.3643 of 2010, Civil Appeal No.3644 of
Civil Appeal No.3645 of 2010, Civil Appeal No.3648 of
2010 and Civil Appeal No.3612-3629 of 2010.
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CIVIL APPEAL NO.3594-3611/2010
1. These appeals have been preferred against the
Judgment of the National Consumer Disputes Redressal
Commission (for short “NCDRC”) dated 2nd November,
2006 in F.A. Nos.464/2002 and 61 to 77 of 2004 by the
Vadodara Municipal Corporation (for short “the
Corporation”), the Oriental Insurance Company Ltd. (for
short “the Insurance Company”) and the proprietor of
Ripple Aqua Sports (hereinafter referred to as “the
Contractor”) against the award of compensation for the
death of 22 persons by drowning in Sursagar Lake at
Vadodara while riding the boat, on account of negligence
in plying the boat.
2. Sursagar Lake is under the control and
management of the Corporation which has been plying
boats for joy rides and boating club. During the period in
question, the contract for plying the boats was given to
Ripple Aqua Sports vide licence agreement
dated 26th September, 1992 for managing the affairs of
the Boating Club at the Lake for purposes of
entertainment. The agreement, inter alia, provided that
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the facility of boating was to be given to the public. It
was necessary that the contractor shall be taking
insurance policies to cover the risk liability of all persons
using the equipment of the club. The Corporation had
the right to supervise the boating club. Accordingly, the
Contractor took insurance policy dated 1st November,
1992. On 11th August, 1993, against the capacity of 20
persons, 38 passengers were allowed to ride in the boat
which capsized resulting in the death of 22 passengers.
3. The victims approached the State Commission
on 30th March, 1994 and around under the provisions of
Consumer Protection Act, 1986 claiming compensation
alleging deficiency of service on the part of the
Contractor and the Corporation. The victims claimed that
the insurance policy covered the claim to the extent of
Rs.20 lakhs per passenger with maximum of Rs.80 lakh
in one year. Under the Bombay Provincial Municipal
Corporation Act, 1949, the Corporation had the duty to
maintain the safety of the passengers and in case of
negligence, the Corporation had the tortuous liability
under the law. The Corporation was also liable for
tortious acts of the Contractor. The passengers had
taken tickets for the boat ride but on account of
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deficiency in service the passengers drowned on
capsizing of the boat which was overloaded. The
occurrence took place on account of negligence of the
contractor as well as failure of the Corporation to
exercise due care. No life guards were provided, no life
saving jackets were provided and if suitable safety
measures would have been taken, the lives of the victims
could be saved.
4. The Insurance Company contested the case and
submitted that as per the insurance policy given, the
liability was limited to Rs.1 lakh per person. Stand of the
Corporation was that complainants were not consumers
and had remedy under the Indian Vessels Act, 1917. The
Contractor was independent licensee without any control
of the Corporation. The stand of the Contractor was that
it was not liable as the claimants were not consumers
and the liability was of the Corporation. The Insurance
Company also opposed the claim and also submitted that
its liability did not exceed Rs.20 lakhs.
5. The State Commission allowed the claims. It held
that even a public authority exercising statutory power
was not exempt from liability for negligent actions.
When the Corporation exercised control over the
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Contractor, it was vicariously responsible for the
negligence of the Contractor. Reliance was placed on
Rajasthan State Road Transport Corporation vs.
Kailash Nath Kothari 1 holding the employer to be
responsible vicariously.
6. As regards liability of the Insurance Company, it
was held that its liability under the policy was Rs.20 lakhs
for one incident which meant one death in view of Motor
Owner’s Insurance Co. Ltd. vs. Jadavji Keshavji
Mod i 2 . The policy was covered by Public Liability
Insurance Act, 1991. It was also held that Contractor
could not escape its liability in the given circumstances
when deficiency in service was patent in view of violation
of Indian Vessels Act, 1917. Negligence in operating the
boat amounted to deficiency in service as held in
Ravneet Singh Bagga vs. KLM Royal Dutch Airlines
& Anr. 3
7. Accordingly, the State Commission held the Aqua
Sports and the Corporation to be jointly and severely
liable. The State Commission awarded total
compensation of Rs.30,18,900/- with interest @ 10% per
annum from the date of the incident till payment. The
1 (1997) 7 SCC 481
2 (1981) 4 SCC 660
3 (2000) 1 SCC 66
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State Commission determined the quantum of
compensation ranging from Rs.50,000/- to Rs.10,76,000/-
in respect of claims for death of 22 passengers.
8. The decision of the State Commission has been
upheld by the NCDRC with the enhancement in quantum
of compensation in some of the cases keeping in mind
principles for determining compensation under the Motor
Vehicles Act, 1988.
9. Affirming the finding of the State Commission, the
NCDRC held:-
“(i) Contractor had the primary liability to
compensate the victims as it was
responsible for the catastrophe in question;
(ii) The Corporation had vicarious liability
for the negligence. Plying boat was
inherently dangerous activity. Even for its
statutory functions, liability for negligence
was attracted on the principle laid down in
Rajkot Municipal vs. Manjuben
Jayantilal Nakum, (1997) 9 SCC 552.
The Corporation failed to perform its duty of
supervision undertaken under the
agreement with the Contractor;
(iii) The Insurance Company was liable
Rs.20 lakhs per accident (per death) subject
to maximum of Rs.80 lakhs as per policy.
Variations in policy could not be allowed in
view of United India Insurance Company
Ltd. vs. M.J.K. Corporation, (1997) 7
SCC 481 and United India Insurance
Company Ltd. vs. Pushpalaya Printers,
(2004) 3 SCC 694 and Life Insurance
Corporation of India and ors. vs. Smt.
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CIVIL APPEAL NO.3594-3611/2010
Asha Goel and anr.,
(2001) 2 SCC 160.
(iv) Insurance Company was bound to act
as per Insurance Regulatory and
Development Authority Acts of 1999 and
2002 regulations framed thereunder and
also Public Liability Act, 1991.”
10. Concluding part of the judgment of the NCDRC is as
“In the result, it is held that:
(i) the Ripple Aqua Sports and the
Vadodara Municipal Corporation are jointly
and severally liable to pay the
compensation to the Complainants as
(ii) the Vadodara Municipal Corporation is
directed to pay the balance of
compensation (that is, after deducting the
amount paid) to the Complainants in each
case within a period of eight weeks from the
date of the Order. It would be open to the
Corporation to recover the same from the
Ripple Aqua Sports;
(iii) the Insurance Company is liable to
pay Rs.20 lakhs for each accident, namely,
each death, but in aggregate the sum is
limited to Rs.80 lakhs. Hence, the
Insurance Company shall reimburse, in all,
Rs. 80 lakhs to the Vadodara Municipal
Corporation; and,
(iv) the rest of the order passed by the
State Commission directing payment of
interest at the rate of 10% p.a. from the
date of the incident, i.e. from 11.8.1993 till
the date of payment of compensation is
With these modifications the First
Appeal Nos.464 of 2002 and First Appeal
Nos.464 of 2002 and First Appeal Nos.61 to
77 of 2004 filed by the Vadodara Municipal
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CIVIL APPEAL NO.3594-3611/2010
Corporation are disposed of accordingly.
Considering the facts, there shall be no
order as to costs.
First Appeal Nos. 197 of 2003 and
First Appeal Nos.210 to 226 of 2003 filed by
the Ripple Aqua Sports are disposed of
accordingly. There shall be no order as to
Cross-Appeals for enhancement:
The Appeals filed by the Complainants
in First Appeal Nos.488 of 2002; 289 of
2004; 290 of 2004; 292 of 2004; 295 of
2004 and 296 of 2004 are dismissed. There
shall be no order as to costs.
The First Appeal Nos.288 of 2004; 291
of 2004; 294 of 2004; 297 of 2004; 299 of
2004; 293 of 2004; 298 of 2004, and 300 of
2004 filed by the complaints are partly
allowed. The order passed by the State
Commission is modified as under:-
It is held that the complainants are
entitled to have compensation of:-
(i) Rs.1 lakh in each Appeal Nos.288 of
2004, 291 of 2004; and 294 of 2004;
(ii) Rs.1,25,000/- in each Appeal Nos.297
of 2004 and 299 of 2004;
(iii) Rs.1,50,000/- in each Appeal Nos.293
of 2004; 298 of 2004; and 300 of 2004.”
11. We have heard learned counsel for the parties.
12. Learned counsel for the Corporation submitted that
the Corporation was not a service provider and had no
privy contract with the victims. It was only facilitating
the plying of boating and the liability was of the
contractor. As per the licence agreement dated 26th
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September, 1992, control and responsibility for the
boating activities was completely of the contractor. The
Corporation had no direct control over the contractor or
its employees.
13. Learned counsel for the Insurance Company
submitted that its liability was limited to Rs.1 lakh as per
policy issued on 1st December, 1992 and the policy dated
1st November, 1992 could not be taken into account.
14. Learned counsel for the Contractor, submitted that
it was not responsible for the accident and liability was of
the Manager individually or of the Corporation for whom
the boat was being plied.
15. Learned counsel for the victims supported the
impugned order.
16. On due consideration, we do not find any ground to
interfere. It is not in dispute that the boat was carrying
38 passengers as against the capacity of 22 passengers.
Neither any life guards were deployed nor any life saving
jackets were provided to the passengers. The finding of
negligence concurrently recorded by the State
Commission and the NCDRC does not call for any
interference. Primary liability of the contractor stands
established. The victims were consumers and the
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contractor was service provider. Deficiency of service
stood established. The stand of the Insurance Company
based on second policy dated 1st December, 1992
limiting its liability is untenable. Having issued policy
dated 1st November, 1992 covering loss to the extent of
Rs.20 lakhs per accident with Rs.80 lakhs as maximum in
one year, the Insurance Company could not avoid its
responsibility, as rightly held concurrently by the State
Commission and the NCRDC. Risk was required to be
statutorily covered under the Public Liability Insurance
Act, 1991. The Insurance Company was bound by the
The Insurance Regulatory and Development Authority
(Protection of Policyholders’ Interest) Regulation, 2002
framed under the Insurance Regulatory and Development
Authority Act, 1999 and the law laid down in M.J.K.
Corporation, Pushpalaya Printers and Asha Goel
(supra), rightly referred to by the NCDRC in its order.
17. We do not find any ground to exonerate the
Corporation. Admittedly, the activity in question was
covered by the statutory duty of the Corporation under
Sections 62, 63 and 66 of the Bombay Provincial
Municipal Corporation Act, 1949. Mere appointment of a
contractor or employee did not absolve the Corporation
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of its liability to supervise the boating activities
particularly when there are express stipulations in the
contract entered into with the contractor. The
Corporation was not only discharging its statutory duties
but also was acting as service provider to the passengers
through its agent. The Corporation had a duty of care,
when activity of plying boat is inherently dangerous and
there is clear forseeability of such occurrence unless
precautions are taken like providing life saving jackets.
18. In Municipal Corporation of Delhi vs. Uphaar
Tragedy Victims Association and Ors. 4 , concept of
negligence or breach of duty to take care in Tort law as
against breach of duty in exercising statutory duty in
public law was gone into with reference to developments
in different jurisdictions. It was observed that archaic
principle of State immunity which was based on
assumption of State being efficient, sincere and dignified
was giving way to protection of liberty, equality and rule
of law. Applying the test of proximity of relationship,
reasonable forseeability and justness of claim, liability of
a public authority could be fixed. After noticing
development of law world over, it was observed:-
4 (2011) 14 SCC 481
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“109. Need for a comprehensive legislation
dealing with tortious liability of the State
and its instrumentalities has been
highlighted by this Court and the academic
world on various occasions and it is high
time that we develop a sophisticated
jurisprudence of public law liability. Due to
lack of legislation, the courts dealing with
the cases of tortious claims against the
State and its officials are not following a
uniform pattern while deciding those claims,
and this at times leads to undesirable
consequences and arbitrary fixation of
compensation amount.
110. The Government of India on the
recommendations of the First Law
Commission introduced two Bills on the
government liability in torts in the years
1965-1967 in the Lok Sabha but those Bills
lapsed. In Kasturi Lal case, AIR 1965 SC
1039, this Court has highlighted the need
for a comprehensive legislation which was
reiterated by this Court in various
subsequent decisions as well.
111. Public authorities are now made
liable in damages in UK under the Human
Rights Act, 1998. Section 6 of the Human
Rights Act, 1998 makes a public authority
liable for damages if it is found to have
committed breach of human rights. The
Court of Appeal in England in Anufrijeva v.
Southwark London Borough Council, 2004
QB 1124 : (2004) 2 WLR 603 : (2004) 1 All
ER 833 (CA), attempted to answer certain
important questions as to how damages
should be awarded for breach of human
rights and how should damages be
assessed. Further, such claims are also
dealt by Ombudsmen created by various
statutes: they are independent and
impartial officials, who investigate
complaints of the citizens in cases of
maladministration. Experience shows that
majority of the Ombudsmen’s
recommendations are complied with in
practice, though they are not enforceable in
courts. The European Court of Justice has
developed a sophisticated jurisprudence
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concerning liability in damages regarding
liability of public bodies for the loss caused
by administrative acts.
112. We have highlighted all these facts
only to indicate that rapid changes are
taking place all over the world to uphold the
rights of the citizens against the wrong
committed by statutory authorities and local
bodies. Despite the concern shown by this
Court, it is unfortunate that no legislation
has been enacted to deal with such
situations. We hope and trust that utmost
attention would be given by the legislature
for bringing in appropriate legislation to
deal with claims in public law for violation of
fundamental rights guaranteed to the
citizens, at the hands of the State and its
19. In view of above discussion, while upholding the
liability of the Corporation, we reiterate that not only
Constitutional Courts have to, in suitable cases, uphold
claims arising out of loss of life or liberty on account of
violation of statutory duties of public authorities, in
private law remedies, just and fair claims of citizens
against public bodies have to be upheld and
compensation awarded in Tort. Where activity of a public
body is hazardous, highest degree of care is expected
and breach of such duty is actionable. This obligation is
also referable to Article 21. We reiterate the need for a
comprehensive legislation dealing with tortious liability of
the State and its instrumentalities in such cases for
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certainty on the subject. We request the Law
Commission to look into the matter and take such steps
as may be found necessary.
20. Accordingly, we do not find any merit in the appeals
filed by the contractor, the Corporation and the Insurance
Company against the award of compensation by the
State Commission as affirmed/modified by the NCDRC.
The appeals are accordingly dismissed. There will,
however, be no order as to costs. A copy of this order be
forwarded to the Law Commission for further necessary
September 10, 2014