Karnataka High Court
New India Assurance Co. Ltd. vs Sri. Satu @ Satappa Mayagonda Patil on 22 February, 2013
Author: B S Indrakala
Bench: B S Indrakala
-1-
IN THE HIGH COURT OF KARNATAKA
CIRCUIT BENCH AT DHARWAD
DATED THIS THE 22ND DAY OF FEBRUARY 2013
PRESENT
THE HON'BLE MR.JUSTICE H.BILLAPPA
AND
THE HON'BLE MRS.JUSTICE B.S.INDRAKALA
MFA No.20794/2010 (MV)
BETWEEN:
New India Assurance Co. Ltd.,
Divisional Office, Club Road,
Belaum, represented through its
Regional Office,
Unity Building Annexe, Mission Road,
Bangalore-560 027.
Rep.by its Deputy Manager,
Sri.C.R.Subramanya.
...Appellant
(By Sri.S.S.Koliwad, Adv.)
AND:
1. Sri.Satu @ Satappa Mayagonda Patil,
Aged about 48 years, Occ: Nil,
R/o Mutaga, Tal and Dist: Belgaum.
2. Smt.Sudha Satu @ Sattappa Patil,
Age: 43 years, Occ: Household Work,
R/o Mutaga, Tal & dist: Belgaum.
3. Sri.Channayya Gurushantayya Hiremath,
-2-
Age: major, Occ: Business,
R/o 1805, Maragai Galli, Kakati,
Tal & Dist: Belgaum. ...Respondents
(By Sri.Harish.S.Maigur, Adv. for R1 & R2)
*****
This appeal is filed under section 173(1) of the Motor
Vehicles Act 1988, against the judgment and award dated
20.10.2009 passed in M.V.C.No.3176/2006 on the file of the I-
Addl. Civil Judge (Sr.Dn.) & MACT, Belgaum, awarding the
compensation of Rs.18,64,000/- with interest at the rate of 9% p.a.
from the date of petition till realization.
This appeal coming on for dictating judgment this day,
H.BILLAPPA, J., delivered the following:-
JUDGMENT
This appeal by the appellant - Insurance Company is directed against the judgment and award, dated 20.10.2009, passed by the First Addl. Civil Judge (Sr.Dn.) & MACT, Belgaum, in MVC No.3176/2006.
2. By the impugned judgment and award, the Tribunal has awarded a sum of `.18,64,000/- with interest at 9% p.a. from the date of petition till the date of realization.
-3-3. Aggrieved by that, the appellant-Insurance Company has filed this appeal questioning the quantum as well as its liability.
4. Briefly stated the facts are:
The respondents 1 and 2 are the parents of the deceased Anil Satu @ Satappa Patil. That on 30.10.2006, the deceased Anil Patil and Prashant @ Parashuram Kallappa Chougale were proceeding from Sambra Village to Mutaga on Hero Honda motorcycle. The deceased Anil Patil was riding the motorcycle. When they reached near the house situated near Mutaga bus stand, on Belgaum-Bagalkot road, at about 6.30 p.m., a jeep bearing No.KA-22/A-6154 came from the opposite direction at high speed and dashed against the motorcycle. As a result of that, the deceased Anil Patil and Prashant @ Parashuram sustained injuries and Anil Patil succumbed to the injuries. The respondents 1 and 2 claimed compensation of `.30,00,000/-. The Tribunal has awarded a sum of `.18,64,000/- with interest at 9% p.a. from the date of -4- petition till the date of realization. Aggrieved by that, the appellant-Insurance Company has filed this appeal questioning the quantum as well as its liability.
5. The learned counsel for the appellant-insurance company contended that the impugned judgment and award cannot be sustained in law. He also submitted that the driver of the jeep did not possess valid licence to drive transport vehicle and therefore, the Tribunal was not justified in fastening the liability on the appellant-Insurance Company.
Further he submitted that the jeep was a transport vehicle and the driver possessed the licence to drive non-transport vehicle. He also submitted that the Tribunal has erred in taking the income of the deceased at `.41,655/- taking into consideration that the probable salary of the deceased would have been about `.35,000/- p.m at the end of his service. He also submitted that, once the liability is not fastened on the insurance company, it cannot be directed to pay and recover -5- from the owner. He placed reliance on the following decisions.
i) National Insurance Co. Ltd. Vs. Parvathneni reported in LAWS(SC)-2009-8-68.
ii) National Insurance Company Ltd., Vs. Annappa Irappa Nesaria reported in LAWS(SC)-2008-1-142.
iii) Oriental Insurance Company Ltd., Vs. Angad Kol and Others reported in 2009 (2) T.A.C. 4 (S.C.).
iv) New India Assurance Co. Ltd., Vs. Roshanben Rahemansha Fakir and Another reported in 2008 ACJ 2161.
v) National Insurance Company Ltd., Vs. Kusum Rai reported in LAWS(SC)-2006-3-93.
6. As against this, the learned counsel for the respondents 1 and 2 submitted that the impugned judgment and award does not call for interference. He also submitted that the Tribunal has rightly taken the income of the deceased at `.41.655/- keeping in view that the deceased would have earned about `.35,000/-p.m. at the end of his service. Further he submitted that, as the deceased was a military person, he would have spent very little on himself -6- and therefore, only 1/3rd needs to be deducted towards personal expenses. Further he submitted that the insurance company has not led any evidence to show that the driver of the jeep did not possess valid licence. He also submitted that, in case, if it is held that the driver of the jeep did not possess valid licence, then, the insurance company may be directed to pay and recover from the owner. He placed reliance on the following decisions.
i) National Insurance Co. Ltd., Vs. Swaran Singh and Others reported in 2004 ACJ 1.
ii) Kusum Lata and Others Vs. Satbir and Others reported in (2011) 3 Supreme Court Cases 646.
iii) Jawahar Singh Vs. Bala Jain and Others reported in (2011) 6 Supreme Court Cases 425.
iv) Skandia Insurane Co. Ltd., Vs. Kokilaben Chandravadan and Others reported in (1987) 2 Supreme Court Cases 654.
v) United India Insurance Company Limited Vs. Lehru reported in LAWS(SC)-2003-2-96.
vi) New India Assurance Co., Shimla, Vs. Kamala, Kanku, Sheela Devi reported in LAWS(SC)-2001-3-
50. -7-
7. We have carefully considered the submissions made by the learned counsel for the parties.
8. The points that arise for consideration are:
1) Whether the impugned judgment and award calls for interference?
2) Whether the insurance company can be directed to pay and recover from the owner in the facts and circumstances of this case?
9. Point No.1:
It is relevant to note, the deceased Anil Patil died in the accident that occurred on 30.10.2006 is not in dispute. The deceased was serving in the Army as a Soldier (H.Sepoy).
Ex.P13 shows that the deceased was getting salary of `.6,655/- p.m. The Tribunal has taken the income of the deceased at `.41,655/- taking into consideration that the probable salary of the deceased would have been about `.35,000/-p.m. at the end of his service. Thereafter, dividing it by 2 and deducting 50% towards the personal expenses of the deceased, the Tribunal has arrived at a figure of -8- `.10,000/- p.m. Thereafter, taking the age of the mother and adopting multiplier of '15', the Tribunal has awarded a sum of `.18,00,000/- towards loss of dependency. The Tribunal has erred in taking the probable salary of the deceased at `.35,000/- p.m. There is no basis for this. Except the oral testimony of P.W.2, there is nothing on record to show that the deceased would have earned about `.35,000/- per month or he had any promotional opportunity. Ex.P13 shows that the deceased was getting salary of `.6,655/- per month.
Therefore, we take the income of the deceased at `.6,655/-
p.m. The deceased was aged about 20 years at the time of accident. Therefore, 50% needs to be added towards future prospects. If 50% is added, then, the income comes to `.9,983/- per month. It is rounded off to `.10,000/-. The deceased was a bachelor. Therefore, 50% needs to be deducted towards personal expenses of the deceased. If 50% is deducted, the loss of dependency per month comes to `.5,000/- p.m. The claimants are the parents. Therefore, the age of the mother needs to be taken. The mother was aged -9- about 40 years at the time of accident. Therefore, the appropriate multiplier is '15'. The compensation payable towards loss of dependency comes to `.5000 x 12 x 15 = 9,00,000/-. Accordingly, a sum of `.9,00,000/- is awarded towards loss of dependency.
10. The Tribunal has awarded a sum of `.9,000/-
towards medical expenses; `.10,000/- towards loss of love and affection; `.35,000/- towards loss of estate and `.10,000/- towards funeral expenses and transportation and it does not call for interference.
11. The total compensation payable comes to `.9,64,000/- and the break up is as follows:
i. Towards loss of dependency. `.9,00,000/- ii. Towards medical expenses `. 9,000/- iii. Towards loss of love and affection `. 10,000/- iv. Towards loss of estate `. 35,000/- v. Towards funeral expenses and `. 10,000/-
transportation
Total `.9,64,000/-
Point No.1 answered, accordingly.
- 10 -
12. Point No.2:
The learned counsel for the appellant-insurance
company contended that the driver of the jeep did not possess valid licence to drive transport vehicle and therefore, liability cannot be fastened on the appellant - Insurance Company.
Further he submitted that the jeep was a transport vehicle and the driver possessed the licence to drive light motor non-
transport vehicle and therefore, the Tribunal was not justified in fastening the liability on the appellant- Insurance Company.
13. As against this, the learned counsel for the respondents 1 and 2 submitted that the insurance company has not adduced any evidence and even assuming that the driver did not possess valid licence, then also, the insurance company may be directed to pay and recover from the owner.
14. We will briefly refer to decisions cited by the learned counsel for the parties.
- 11 -
15. In National Insurance Co. Ltd., Vs. Kusum Rai reported in LAWS(SC)-2006-3-93, the Hon'ble Supreme Court has held that the driver did not posses valid licence and therefore, the insurance company is not liable to pay the compensation. However, in the circumstances of the case, the Hon'ble Supreme Court exercising jurisdiction under Article 136 of the Constitution, has directed that the appellant may recover the amount from the owner.
16. In New India Assurance Co. Ltd., Vs. Roshanben Rahemansha Fakir and Another reported in 2008 ACJ page 2161, the Hon'ble Supreme Court has held that the driver did not possess valid licence to drive transport vehicle and therefore, the insurance company is not liable. However, exercising power under Article 142 of the Constitution of India, the Insurance Company is directed to satisfy the award and recover the same.
17. In National Insurance Company Limited Vs. Parvathneni and Another reported in (2009) 8 SCC page 785,
- 12 -
the Hon'ble Supreme Court has directed to place the matter before the Hon'ble Chief Justice of India for constituting a larger Bench to decide the following questions.
"i. If an insurance company can prove that it does not have any liability to pay any amount in law to the claimants under the Motor Vehicles Act or any other enactment, can the court yet compel it to pay the amount in question giving it liberty to later on recover the same from the owner of the vehicle?
ii. Can such a direction be given under Article 142 of the Constitution, and what is the scope of Article 142? Does Article 142 permit the Court to create a liability where there is none?"
18. In The New India Insurance Company Ltd. Vs. Laxmamma and another reported in ILR 2011 KAR PAGE.3210, this Court has held that the rider of the motor cycle was authorized to drive four wheelers and insurance company is not liable to pay the compensation. The owner is made liable to pay the compensation.
- 13 -
19. In NATIONAL INSURANCE COMPANY LIMITED VS. SWARAN SINGH reported in 2004 ACJ page 1, the Hon'ble Supreme Court has observed as follows at paragraphs 81, 84, 102(iii) and (iv) as follows;
"81. Section 10 of the Act provides for forms and contents of licenses to drive. The licence has to be granted in the prescribed form. Thus, a licence to drive a light motor vehicle would entitle the holder to drive the vehicle falling within that class or description.
84. On all pleas of breach of licensing conditions taken by the insurer, it would be open to the Tribunal to adjudicate the claim and decide inter se liability of the insurer and insured; although where such adjudication is likely to entail undue delay in decision of the claim of the victim, the Tribunal in its discretion may relegate the insurer to seek its remedy of reimbursement from the insured in the civil court."
102 (iii) The breach of policy conditions, e.g., disqualification of driver or invalid driving license of the driver, as contained in sub-section (2)
(a) (ii) of section 149, have to be proved to have
- 14 -
been committed by the insured for avoiding liability by the insurer. Mere absence, fake or invalid driving license or disqualification of the driver for driving at the relevant time, are not in themselves defences available to the insurer against either the insured or the third parties. To avoid its liability towards insured, the insurer has to prove that the insured was guilty of negligence and failed to exercise reasonable care in the matter of fulfilling the condition of the policy regarding use of vehicles by duly licensed driver or one who was not qualified to drive at the relevant time.
102(iv) The insurance companies are, however, with a view to avoid their liability must not only establish the available defence(s) raised in the said proceedings but must also establish 'breach' on the part of the owner of the vehicle, the burden of proof wherefor would be on them.
20. In KUSUMLATHA AND OTHERS VS SATBIR and Others reported in 2011 (3) SCC page 646, the Hon'ble Supreme Court has observed as follows at paragraph 13:
- 15 -
"13. In respect of the dispute about licence, the Tribunal has held and, in our view rightly, that the insurance company has to pay and then may recover it from the owner of the vehicle. This Court is affirming that direction in view of the principles laid down by a three-Judge Bench of this Court in National Insurance Co. Ltd. v. Swaran Singh."
21. In JAWAHAR SING Vs. BALA JAIN AND OTHERS reported in (2011) 6 SCC page 425, the Hon'ble Supreme Court has directed the insurance company to pay the compensation and thereafter, recover from the owner. It is observed as follows at paragraphs 12, 13 and 14;
"12. Before the Tribunal reliance was also placed on the decision in National Insurance Co. Ltd. v. Gh. Mohd. Wani and National Insurance Co. Ltd. v. Gadigewwa, wherein it was held that if the driver of the offending vehicle did not have a valid driving licence, then the Insurance Company after paying the compensation amount would be entitled to recover the same from the owner of the vehicle. It was submitted that no interference was called for
- 16 -
with the judgment and order of the High Court impugned in the special leave petition.
13. Having heard the learned counsel for the respective parties, we are inclined to agree with the respondents that this is not a case for interference in view of the fact that admittedly the motorcycle belonging to the petitioner was being driven by Jatin, who had no licence to drive the same and was, in fact, a minor on the date of the accident. While issuing notice on 02-04-2009, we had limited the same to the question regarding liability to pay compensation on account of contributory negligence by the deceased who was riding a scooter, in causing the accident to happen.
14. We cannot shut our eyes to the fact that it was Jatin, who came from behind on the motorcycle and hit the scooter of the deceased from behind. The responsibility in causing the accident was, therefore, found to be solely that of Jatin. However, since Jatin was a minor and it was the responsibility of the petitioner to ensure that his motorcycle was not misused and that too by a minor who had no licence to drive the same, the Motor Accidents Claims Tribunal quite rightly
- 17 -
saddled the liability for payment of compensation on the petitioner and, accordingly, directed the Insurance Company to pay the awarded amount to the awardees and, thereafter, to recover the same from the petitioner. The said question has been duly considered by the Tribunal and was correctly decided. The High Court rightly chose not to interfere with the same."
22. In SKANDIA INSURANCE CO. LTD VS KOKILABEN CHANDRAVADAN & Others reported in (1987) 2 SCC page 654, the Hon'ble Supreme Court has observed as follows at paragraph 12;
The defence built on the exclusion clause cannot succeed for three reasons viz:
1. On a true interpretation of the relevant clause which interpretation is at peace with the conscience of Section 96, the condition excluding driving by a person not duly licensed is not absolute and the promisor is absolved once it is shown that he has done everything in his power to keep, honour and fulfil the promise and he himself is not guilty of a deliberate breach.
- 18 -
2. Even if it is treated as an absolute promise, there is substantial compliance therewith upon with an express or implied mandate being given to the licensed driver not to allow the vehicle to be left unattended so that it happens to be driven by an unlicensed driver.
3. The exclusion clause has to be 'read down' in order that it is not at war with the 'main purpose; of the provisions enacted for the protection of victims of accidents so that the promisor is exculpated when he does everything in his power to keep the promise.
23. In UNITED INDIA INSURANCE COMPANY LTD., VS LEHARU reported in LAWS (SC)-2003-2-96, the Hon'ble Supreme Court has observed as follows at paragraphs 9 and 10;
"9. It is submitted that Kamla's case is not correctly decided. IT is submitted that subsection (7) of Section 149 of the Motor Vehicles Act, 1988 has not been noticed by this Court in Kamla's case. We see no substance in this submission. A plain reading of
- 19 -
Section 149 would show that an insurance company would continue to be liable to third persons Section 149 read as follows:
"149. Duty of insurers to satisfy judgments and awards against persons insured in respect of third party risks.
If, after a certificate of insurance has been issued under sub-section (3) of Section 147 in favour of the person by whom a policy has been effected, judgment or award in respect of any such liability as is required to be covered by a policy under clause (b) of sub-section (1) of section 147 (being a liability covered by the terms of the policy) or under the provisions of Section 163A is obtained against any person insured by the policy, then, notwithstanding that the insurer may be entitled to avoid or cancel or may have avoided or cancelled the policy, the insurer shall, subject to the provisions of this section, pay to the person entitled to the benefit of the decree any sum not exceeding the sum assured payable thereunder, as if he were the judgment debtor, in respect of the liability, together with any amount payable in respect of costs and any sum payable in respect of interest on
- 20 -
that sum by virtue of any enactment relating to interest on judgments. (emphasis supplied) No sum shall be payable by an insurer under sub-section (1) in respect of any judgment or award unless, before the commencement of the proceedings in which the judgment of award is given the insurer had notice through the Court or as the case may be the Claims Tribunal of the bringing of the proceedings, or in respect of such judgment or award so long as execution is stayed thereon pending an appeal; and an insurer to whom notice of the bringing of, any such proceedings is so given shall be entitled to be made a party thereto and to defend the action on any of the following grounds namely:
(a) that there has been a breach of a specified condition on the policy, being one of the following condition, namely:
a condition excluding the use of the vehicle-
for hire or reward, where the vehicle is on the elate of the contract of insurance a vehicle not covered by a permit to ply for hire or reward, or
- 21 -
for organized racing and speed testing, or for a purpose not allowed by the permit under which the vehicle is used, where the vehicle is a transport vehicle, or without side-car being attached where the vehicle is a motor cycle: or a condition excluding driving by a named person or persons or by any person who is not duly licensed, or by any person who has been disqualified for holding or obtaining a driving licence during the period of disqualification; or a condition excluding liability for injury caused or contributed to by conditions of war, civil war, riot or civil commotion; or
(b) that the policy is void on the ground that it was obtained by the non-disclosure of a material fact or by a representation of fact which was false in some material particular.
Where any such judgment as is referred to in sub-section(1) is obtained from a Court in a reciprocating country and in the case of a foreign judgment is by virtue of the provisions of section 13 of the Code of Civil Procedure, 1908 of 1908) conclusive as to any matter adjudicated upon by it,
- 22 -
the insurer (being an insurer registered under the Insurance Act, 1938 (4 of 1938) and whether or not he is registered under the corresponding law of the reciprocating country) shall be liable to the person entitled to the benefit of the decree in the manner and to the extent specified in sub-Section (1), as if the judgment were given by a Court in India; Provided that no sum shall be payable by the insurer in respect of any such judgment unless, before the commencement of the proceedings in which the judgment is given, the insurer had notice through the Court concerned of the bringing of the proceedings and the insurer to whom notice is given is entitled under the corresponding law of the reciprocating country, to be made a party to the proceedings and to defend the action on grounds similar to those specified in sub-section (2).
Where a certificate of insurance has been issued under sub-section (3) of Section 147 to the person by who a policy has been effected/so much of the policy as purports to restrict the insurance of the persons insured thereby by reference to any condition other than those in clause (b) of sub- Section (1) of Section 147, be of no effect. Provided
- 23 -
that any sum paid by the insurer in or towards the discharge of any liability of any person which is covered by the policy by virtue only of this subsection shall be recoverable by the insurer from that person.
If the amount which an insurer becomes liable under this section to pay in respect of a liability incurred by a person insured by a policy exceeds the amount for which the insurer would apart from the provisions of this section be liable under the policy in respect of that liability, the insurer shall be entitled to recover the excess from that person.
In this section the expression "material fact"
and "material particular" means, respectively a fact or particular of. Such a nature as to influence the judgment of a prudent insurer in determining whether he will take the risk and, if so, at what premium and on what conditions, and the expression "liability covered by the terms of the policy" means a liability which is covered by the policy or which would be so covered but for the fact that the insurer is entitled to avoid or cancel or has avoided or cancelled the policy.
- 24 -
No insurer to whom the notice referred to in sub-section (2) or sub-section (3) has been given shall be entitled to avoid his liability to any person entitled to the benefit of any such judgment or award as is referred to in sub-section (I) or in such judgment as is referred to in sub-section (3) otherwise than in the manner provided for in sub- section (2) or in the corresponding law of the reciprocating country, as the case may be.
Thus under sub Section (1) the Insurance Company must pay to the person entitled to the benefit of the decree, notwithstanding that it has become 'entitled to avoid or cancel or may have avoided or cancelled the policy". The words "subject to the provisions of this Section" mean that the Insurance Company can get out of liability only on grounds set out in Section 149. Sub-section (7), which has been relied on, does not state anything more or give any higher right to the Insurance Company. On the contrary the wording of sub- section 97) viz. No insurer to whom the notice referred to in sub-section 92) or sub-section (3) has been given shall be entitled to avoid his liability indicate that the Legislature wanted to clearly
- 25 -
indicate that Insurance Companies must pay unless they are absolved of liability on a ground specified in sub-section (2). This is further clear from sub-section (4) which mandates that conditions, in the insurance, policy, which purport to restrict insurance would be of no effect if they are not of the nature specified in sub-section (2). The proviso to sub-section (4) is very illustrative. IT shows that the insurance company has to pay to third parties but it may recover from the person who was primarily liable to pay. The liability of the Insurance Company to pay is further emphasised by sub-Section (5). This also shows that the Insurance Company must first pay, then it can recover. If Section 149 is read as a whole it is clear that sub-Section (7) is not giving any additional right to the Insurance Company on the contrary it is emphasising that the Insurance Company cannot avoid liability except on the limited grounds set out in sub-section 92).
10. NOW let us consider Section 149(2). Reliance has been placed on section 149(2)(a)(ii). As seen in order to avoid liability under this provision it must be shown that there is a "breach"
- 26 -
as held in Skandia's and Sohanlal Passi's cases (supra), the breach must be on part of the insured. We are in full agreement with that to hold otherwise would lead to absurd results. Just to take an example, suppose a vehicle is stolen. Whilst it is being driven by the thief there is an accident. The thief is caught and it is ascertained that he had no licence. Can the Insurance Company disown liability? The answer has to be an emphatic "No". To hold otherwise would be to negate the very purpose of compulsory insurance. The injured or relatives of person killed in the accident may find that the decree obtained by them is only a paper decree as the owner is a man of straw. The owner himself would be an innocent sufferer. It is for this reason that the Legislature, in its wisdom, has made insurance, at least third party insurance, compulsory. The aim and purpose being that an Insurance Company would be available to pay. The business of the Company is to insurance in all businesses there is an element of risk. All persons carrying on business must take risks associated with that business. Thus it is equitable that the business which is run for making profits also bears the risk associated with it. At the same time
- 27 -
innocent parties must not be made to suffer or loss. These provisions meet these requirements. We are thus in agreement with what is laid down in aforementioned cases viz. That in order to avoid liability it is not sufficient to show that the person driving at the time of accident was not duly licensed. The Insurance Company must establish that the breach was on the part of the insured.
Section 3 of the Motor Vehicles Act, 1988 prohibits driving of a motor vehicle in any public place unless the driver has an effective driving licence. Further Section 180 of the Motor Vehicle Act makes an owner or person in charge of a motor vehicle punishable with imprisonment or fine if he causes or permits a person without a licence to drive the vehicle. It is clear that the punishment under Section 180 can only be imposed if the owner or person in charge of vehicle "causes or permits"
driving by a person not duly licensed. Thus there can be no punishment if a person without a licence drives without permission of the owner. Section 149(2)(a)(ii) merely recognises this condition. It therefore only absolves the Insurance Company where there is a breach by the insured.
- 28 -
When an owner is hiring a driver he will therefore have to check whether the driver has a driving licence. If the driver produces a driving licence which on the face of it looks genuine, the owner is not expected to find out whether the licence has in fact been issued by a competent authority or not. The owner would then take the test of the driver. If he finds that the driver is competent to drive the vehicle, he will hire the driver. We find it rather strange that Insurance Companies expect owner to make enquiries with RTOs. which are spread all over the country, whether the driving licence shown to them is valid or not. Thus where the owner has satisfied himself that the driver has a licence and is driving competently there would be no breach of Section 149(2)(a)(ii). The Insurance Company would not then be absolved of liability. If it ultimately turns out that the licence was fake the Insurance Company would continue to remain liable unless they prove that the owner/insured was aware or had noticed that the licence was fake and still permitted that person to drive. More importantly even in such a case the Insurance Company would
- 29 -
remain liable to the innocent third party, but it may be able to recover from the insured. This is the law which has been laid down in Skandia's, Sohan Lal Passi's and Kamla's case. We are in full agreement with the views expressed therein and see no reason to take a different view."
24. In NEW INDIA ASSURANCE COMPANY LTD., SIMLA VS. KAMLA, KANKU, SHEELA DEVI reported in LAWS (SC)-2001-3-50, the Hon'ble Supreme Court has observed as follows at para 12;
"12. THE position can be summed up thus:
THE insurer and insured are bound by the conditions enumerated in the policy and the insurer is not liable to the insured if there is violation of any policy condition. But the insurer who is made statutorily liable to pay compensation to third parties on account of the certificate of insurance issued shall be entitled to recover from the insured the amount paid to the third parties, if there was any breach of policy conditions on account of the vehicle being driven without a valid licence. Learned counsel for the insured contended that it is enough if he establishes that he made all due
- 30 -
enquiries and believed bona fide that the driver employed by him had a valid driving licence, in which case there was no breach of the policy condition. As we have not decided on that contention it is open to the insured to raise it before the Claims Tribunal. In the present case, if the Insurance Company succeeds in establishing that there was breach of the policy condition, the Claims Tribunal shall direct the insured to pay that amount to the insurer. In default the insurer shall be allowed to recover that amount (which the insurer is directed to pay to the claimants-third parties) from the insured person.
We may point out that as per the order passed by this Court on 06.03.2000, the appellant Insurance Company was directed to pay the award amount to the claimants. We are told that the amount was paid by the appellant to the claimants. Now the Claims Tribunal has to decide the next question whether the insurance company is entitled to recover that amount from the owner of the vehicle on account of the vehicle being driven by a person who had no valid licence to drive the vehicle. For that purpose we remit the case to the Claims
- 31 -
Tribunal. An opportunity shall be afforded to the parties concerned for adducing evidence in that regard. We make it clear that the claimants shall not be bothered during the remaining part of the proceedings.
The appeals are disposed of in the above terms. Ordered accordingly."
25. In MFA No.2596/2007 ORIENTAL INSURANCE COMPANY LTD., VS K.C. SUBRAMANYAM and Another, the Division Bench of this court has observed as follows at paragraph 82;
"82.From the above discussion, what follows is:
(a) If the vehicle involved in the accident is duly insured and the insurer has issued the certificate of insurance as provided under Sub-Section (3) of Section 147, the liability of the insurer to satisfy the claim awarded under Section 147(1)(b) is absolute.
Once the claimant issues the notice to the insurer in his claim petition and thereafter the Claims Tribunal passes an award, the insurer by virtue of Section 149(1) steps into the shoes of judgment debtor, that is steps into the shoes of the insured
- 32 -
and is bound to pay the amount awarded to the third party. The liability is created under the statute.
(b) When the notice is issued under Section 149(2), the insurer gets a right to defend the action, that is the action brought by the claimants. He can defend the action only on the grounds mentioned in Sub-Section (2) of Section 149. No other grounds are available to the insurer.
(c) If the defence of the insurer is that under the terms of the policy he has restricted his liability to indemnify a particular amount and is not liable to pay the amount as statutorily provided under Section 147(1)(b), though he is entitled to such a defence, the tribunal or Court shall ignore the said restrictive clause in the policy and pass a decree or award directing payment of compensation in terms of Section 147(1)(b) of the Act. The insurer shall satisfy the decree or award. On such satisfaction, the insurer gets the right to recover the amount which was not liable to be paid under the policy from the insured.
- 33 -
(d) Similarly if the amount paid by the insurer in terms of the award or decree is in excess of the amount agreed to be paid under the policy, the insurer gets a right under sub-section (5) of Section 149 to recover the same from the insured after paying the said amount to the third party.
(e) The condition precedents for application of the rule 'pay and recover' is, there should be a valid policy of insurance and there is no breach of the terms and conditions of the policy. The dispute is regarding the nature and quantum of liability to be satisfied. If the contract restricts the liability to a particular sum, when the Statute provides for payment of a higher sum, then the liability is not in dispute. It is the quantum, which is in dispute. Therefore, the Legislature advisedly expressed this principle of pay and recover in Sub-sections (4) and (5) of Section 149 and directed the insurer to pay the amount awarded or decreed and recover the excess amount from the insured. In other words, this principle of pay and recover applies to cause, which fall under Sub-Section (4) and (5) of Section 149 only.
- 34 -
(f) The Legislature consciously has not conferred such a right or obligation while dealing with the cases of breach of terms of the agreement or cause in which the statutory grounds mentioned in Section 149(2) are established. Such a provision is conspicuously missing in Section 149(2) or in Section 149(1). On the contrary, the express provision under Section 149(7) has been introduced. The purpose of Sub-Section (7) of Section 149 is if the claimant has issued notice to the insurer and if the insurer wants to avoid the liability under Section 149(1), he is at liberty to do so by establishing the grounds mentioned in Section 149(2). If these grounds are established, then there is no liability on the part of the insurer to pay the amount decreed or awarded under Section 149(1). When the liability itself is not there or when the liability is avoided on one of the grounds mentioned in Section 149(2), there is no liability to pay the amount decreed or awarded. When there is no liability to pay or satisfy the award or decree, the question of directing the insurer in those circumstances to pay and recover would not arise.
- 35 -
(g) The Apex Court after holding that the insurer has no obligation to pay, but still has directed the insurer to pay and recover from the insured. Such a direction is issued by virtue of the power conferred on the Apex Court under Article 142 of the Constitution, which power neither this Court nor the Tribunal can exercise.
(h) Therefore, it is not the law laid down by the Apex Court under Article 141 of the Constitution that when the insurer is not liable to pay still he can be directed to pay and recover.
(i) In fact, one of the Benches of the Supreme Court, doubting the correctness of this practice in the Supreme Court of directing pay and recover by exercising the power conferred under Article 142 of the Constitution, has referred the matter to a larger Bench. We have not interpreted in this case the scope and ambit of Article 142 of the Constitution. We are strictly confining our jurisdiction to interpret the statutory provisions in the light of the judgments of the Supreme Court."
26. In THE NATIONAL INSURANCE COMPANY LTD., VS. ANNAPPA IRAPPA NESARIA reported in LAWS (SC)-
- 36 -
2008-1-142/TLPRE-2008-0-85, the Hon'ble Supreme Court has held that the driver who had a valid licence to drive a light motor vehicle was authorised to drive a light goods vehicle as well and the amendments carried out in the Rules having a prospective operation, the license held by the driver of the vehicle in question cannot be said to be invalid in law.
27. In the present case, the driver of the jeep was holding light motor (NT) license. Ex.R-1 is the policy. The risk is covered. Ex.R1 shows that the jeep is a goods carrying commercial vehicle. The appellant-Insurance Company has not led any evidence. However, the claimants have produced driving licence Ex.P.10. It shows that the driver of the jeep was holding license to drive non-transport light motor vehicle.
The vehicle involved in the accident is a jeep. It is shown in Ex.R1 that the jeep is a goods carrying commercial vehicle.
It is a transport vehicle. The driver of the jeep possessed licence to drive light motor non-transport vehicle, but not transport vehicle. However, the insurance company has not
- 37 -
led any evidence to show that the breach was on the part of the insured.
28. The Hon'ble Supreme Court in National Insurance Company Limited Vs Kusum Rai's case reported in LAWS (SC) 2006-3-93, New India Assurance Company Limited Vs. Roshanben Rahemansha Fakir and another reported in 2008 ACJ page.2161 has held that the driver did not possess valid driving licence and therefore, the Insurance Company is not liable. In Kusum Rai's case exercising jurisdiction under Article 136 of the Constitution it is directed that the appellant can recover the amount from the owner. In Roshanben Rehamansha Fakir's case exercising power under Article 142 of the Constitution, the insurance company is directed to satisfy the award and recover the same.
29. In NATIONAL INSURANCE COMPANY LIMITED VS. SWARAN SINGH AND OTHERS (2004 ACJ page 1), it is held;
- 38 -
102 (iii) The breach of policy conditions, e.g., disqualification of driver or invalid driving license of the driver, as contained in sub-section (2)
(a) (ii) of section 149, have to be proved to have been committed by the insured for avoiding liability by the insurer. Mere absence, fake or invalid driving license or disqualification of the driver for driving at the relevant time, are not in themselves defences available to the insurer against either the insured or the third parties. To avoid its liability towards insured, the insurer has to prove that the insured was guilty of negligence and failed to exercise reasonable care in the matter of fulfilling the condition of the policy regarding use of vehicles by duly licensed driver or one who was not qualified to drive at the relevant time.
102(iv) The insurance companies are, however, with a view to avoid their liability must not only establish the available defence(s) raised in the said proceedings but must also establish 'breach' on the part of the owner of the vehicle, the burden of proof wherefor would be on them.
- 39 -
30. In Kusuma Lata and Others Vs. Satbir And Others (2011 (3) SCC page 646), the Hon'ble Supreme Court has observed as follows at para.13;
"In respect of the dispute about license, the Tribunal has held and, in our view rightly, that the insurance company has to pay and then may recover it from the owner of the vehicle. This Court is affirming that direction in view of the principles laid down by a three-Judge Bench of this Court in National Insurance Co., Ltd., Vs. Swaran Singh."
31. In JAWAHAR SINGH VS. BALA JAIN AND OTHERS (2011 (6) SCC 425), the Hon'ble Supreme Court has held that the Tribunal has correctly decided and rightly directed the Insurance Company to pay the compensation and recover from the owner.
32. In view of above decisions of the Hon'ble Supreme Court and in the circumstances of this case, we consider it proper to direct the insurance company to pay and recover from the owner.
Point No.2 answered, accordingly.
- 40 -
33. Accordingly, the appeal is allowed in part and the impugned judgment and award passed by the Tribunal in M.V.C.No.3176/2006 stands modified reducing the compensation to `.9,64,000/- from `.18,64,000/- with interest at 9% p.a. from the date of petition till the date of realisation.
The Insurance Company shall deposit the amount within eight weeks from today excluding the amount already deposited, if any.
The Insurance Company can recover the amount from the owner.
The 1st respondent shall be entitled to 40% of the compensation awarded and the 2nd respondent shall be entitled to 60%. From the amount awarded to respondents 1 and 2, 50% shall be invested in fixed deposit in any nationalised bank for a period of 5 years. The respondents 1 and 2 shall be entitled to withdraw the interest accrued on it.
- 41 -
The balance amount shall be released in favour of the respondents 1 and 2.
The amount in deposit before this Court shall be transmitted to the Tribunal for deposit and disbursement.
Sd/-
JUDGE Sd/-
JUDGE MBS/NAA