Madhya Pradesh High Court
Jugal Kishore And Anr. vs Ramlesh Devi And Ors. on 26 September, 2003
Equivalent citations: I(2004)ACC353, 2004ACJ297, 2003(4)MPHT574
Author: Rajendra Menon
Bench: Rajendra Menon
ORDER S.S. Jha, J.
1. Both these appeals are referred to the Larger Bench by the Division Bench to determine the question :--
Whether insurance company can be held liable in the case of death or bodily injuries caused in a motor accident involving a tractor which was insured only for agricultural purpose and the sitting capacity was also shown to be one only but used for different purpose at the time of the accident ?
2. Opposite view has been taken by two Division Benches which resulted into the reference before this Bench, In the case of Baburam v. Om Prakash and Ors. 2000(1) M.P.H.T. 7 (NOC) - 2000 ACJ 390, it is held that in such circumstances, insurance company can not be held liable to pay the compensation jointly and severally with the insurer. Similar view was taken by this Court in the case of Sukhanandan v. Oriental Insurance Co. and others, [1999 (1) TAC 24] and in the case of Ramji Lal and Ors. v. Omkar Lal and others, M.A. No. 86/92, decided on 7-1-2003. However, contrary view has been taken by another Division Bench of this Court in the case of Pushpa Devi v. Kamal Singh [2002(2) TAG 374]. In this case, it is held that even if the tractor is used for the purpose other than agricultural or forestry, insurance company is liable to pay entire compensation which may however be recovered by the insurance company from the owner (insurer). In the light of the aforesaid contrary view of the Division Benches, the matter is referred to Larger Bench.
3. Shri K.N. Gupta, Advocate appearing for the claimants submitted that by Act No. 54/94 Section 147 of the Motor Vehicles Act, 1988 has been amended with effect from 14-11-1994. He submitted that in the light of the amendment in Section 147 insurance company is bound to indemnify the third party. He submitted that the intention of the legislature is explicit and the insurance company is liable to pay the compensation. He submitted that in the facts of the case, judgment of the Apex Court in the case of New India Assurance Co. Ltd. v. Asha Rani, [2003(2) M.P.H.T. 474 (SC) - (2003) 2 SCC 223] is not applicable to this case. This judgment relates to the cases which were prior to Amending Act of 1994. He submitted that it is clear from Para 2 of the aforesaid judgment that three categories of the cases have been defined and it is mentioned that in the case of Asha Rani (supra) cases which fall in the category No. (ii) have been decided. As regards cases in category Nos. (i) and (iii) namely the cases which are covered by Motor Vehicles Act, 1939 and the accidents occurred after 1994 amendment are concerned, have been finally adjudicated in the case of Ramesh Kumar v. National Insurance Co. Ltd, [(2001) 6 SCC 713].
4. Counsel for the claimants then invited attention to Rule 97 of the M.P. Motor Vehicles Rules and Section 88 of the Motor Vehicles Act and submitted that under sub-rule (5) of Rule 97 passengers can be carried in the trolley of the tractor. He submitted that even in the cases where the driver of the vehicle is found to have no valid licence, then also as held by the Apex Court the insurance company is liable to indemnify the victim or members of the family of the victim. In support of his contention he referred to the judgment in the cases of United India Insurance Co. Ltd. v. Lehru (AIR 2003 SC 1292) and Sohan Lal Passi (1996 ACJ 1044).
5. Counsel for the claimants further submitted that third party would include the passengers travelling in the trolley. He submitted that the contract is between the insurer and the insured and any other person who is victim of the accident is a third party to the contract. Insurance Company is bound by statutory liability to pay compensation to victim. Insurance company is bound to indemnity the victim and can not avoid its liability on the ground of breach of the conditions of the policy.
6. It is further contended by the Counsel for the claimants that once the trolley is attached to the tractor it acquires the status of goods carriage and any person travelling in the goods carriage dies or receives injuries in an accident, then the insurance company is under statutory liability to pay the compensation.
7. Counsel for the owner of the vehicle submitted that the provisions of Sections 147 and 149 of the Motor Vehicles Act are clear and specific. Insurance company is bound by the statute to pay compensation to the victim or family members of the victim. In support of his contention, he referred to the judgment in the case of Skandia Insurance Co. Ltd. v. Kokilaben Chandravadan (AIR 1987 SC 1184). He submitted that once the tractor is insured with the trolley, then in the event of an accident, insurance company is liable alongwith the owner of the vehicle for payment of compensation to the gratuitous passenger travelling in the trolley.
8. Shri A.M. Naik, Senior Advocate appearing for the insurance company submitted that the language of Sections 147 and 149 of the Act is specific and the insurance company is not liable to pay any compensation when there is breach of the conditions of the policy. He referred to Sub-section (5) of Section 147 of the Act and emphasized upon the words "policy purports to cover" and submitted that when the insurer issues a policy of insurance under this section, shall be liable to indemnify the person or class of person specified in the policy in respect of any liability which the policy "purports to cover". He submitted that under Section 149(2) insurance company is not liable to pay in respect of the conditions mentioned in sub-clause (ii) of Section 149.
9. Counsel for the insurance company further submitted that the nature of the vehicle will not be changed by mere attaching a trolley to the vehicle and referred to the judgment in the case of Nagashetty v. United India Insurance Co. Ltd. and Ors. (AIR 2001 SC 3356). Counsel for the insurance company referred to Para 10 of the judgment wherein it is held that merely because a trailer is attached to the tractor and the tractor was used for carrying goods, licence to drive tractor could not be ineffective. The Court ultimately held that by attaching a trolley or luggage carrier nature of the vehicle is not changed. It is therefore, contended that the tractor though attached with a trolley if not used for the purpose for which it was insured, then insurance company is not bound to indemnify the insured.
10. In the case of Oriental Insurance Co. Ltd. v. Smt. Chamarin and Ors. [1997(2) TAC 890 (MP)], liability of the insurance company was considered in a case of a dumper used for carrying passengers for hire in breach of the conditions of the policy. In this case, policy specifically imposed a restriction for carrying passengers except employees. The Court held that in such a case, it will not be a fundamental breach of the policy that the owner should in all event be denied indemnification.
11. In the case of United India Insurance Co. v. Lehru (supra), while considering the scope of Section 149 of the Act, the Apex Court held that the insurance company can not avoid its liability towards third party. In this case, driver of the vehicle at the time of the accident was not having valid licence. While considering the scope of Section 96 (2) of the Motor Vehicles Act, 1939 and interpreting Section 96 (6) it is held that if the insurance company is liable to pay something which under the policy of insurance is not bound to pay, the amount can be recovered from the assured. While referring to the judgment in the case of Skandia Insurance Co. Ltd. v. Kokilaben Chandravadan [(1987) 2 SCC 654] the Apex Court has considered the object and purpose of getting the motor vehicles insured and the question whether the insurance company could avoid its liability because the accident was caused by the cleaner of the truck who had no licence. It may be mentioned here that Section 96 (2) (b) (ii) is identical to Section 149(2)(a)(ii). The Apex Court considering the provisions of Section 149(2)(a)(ii) has held in Para 20 of the judgment as under:--
When an owner is hiring a driver he will therefore have to check whether the driver has a driving licence. If the driver produces 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 company expects owners to make enquiries with RTO's, 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 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 (supra), Sohan Lal Passi (supra) and New India Assurance Co. Ltd. v. Kamla (AIR 2001 SC 1419). We are in full agreement with the views expressed therein and see no reason to take a different view.
12. In the case of New India Assurance Co. Ltd. v. CM. Jaya and Ors. [2002(2) M.P.H.T. 289 (SC) = (2002) 2 SCC 278] scope of Section 95 (2) of the Motor Vehicles Act, 1939 and Sections 147 and 149 of the Act has been considered. In this case, the deceased was riding on a pillion seat of two wheeler when it hit the truck which was comprehensively insured with the insurance company. Though liability of the insurance company was limited to Rs. 50000/- it was held that liability of the insurance company was unlimited as the vehicle was comprehensively insured and in the absence of any clause for covering higher risk, in respect of third party, liability of the insurance company could not be unlimited and it is limited to the statutory liability. It is further held that in case the insurance company has not taken any higher liability by accepting higher premium for payment of compensation to the third party, the insurer would be liable to the extent limited under Section 95 (2) of the Act and would not be liable to pay the entire amount. In this case, the Court was considering the question whether in the case of the insurance company not taking any higher liability by accepting a higher premium for payment of compensation to a third party, the insurer would be liable to the extent limited under Section 95 (2) of the Act or the insurer would be liable to pay entire amount which it may ultimately recover from the insured. It was in that case, that the liability of the insurance company was limited to Rs. 50000/- only.
13. In the case of Amrit Lal Sood v. Kaushyalaya Devi Thapar[AIR 1998 SC 1433] the Apex Court considered the meaning of the words "any person" and held that where the insurer has agreed to indemnify the insured against all sums which the insured become liable to pay in respect of death or bodily injury to "any person", it is held that the expression "any person" would include the owner of the car who is gratuitously travelling in a car.
14. Word "third party" is considered by the Division Bench of this Court in the case of Usha Jain v. United India Insurance Co. and Ors. (1996 JLJ 117) in Para 7 of the judgment, it is held that word "third party" have nowhere been defined in the Act and under Chapter VIII Section 93 (d) of the Act only states that "third party" includes the "Government". In the context of the provisions contained in Chapter VIII and the Scheme of Insurance with regard to motor vehicles, it may well be understood by the words "third party" that they include persons and Government other than the insurer and insured.
15. In the case of Nagashetty (supra) the question was considered that the driver of the vehicle was not having valid licence to drive a tractor. It was contended that under Section 10 licence is granted to drive specific category of motor vehicles. Merely attachment of a trailer to the tractor for carrying goods, licence to drive tractor will not become ineffective. Tractor shall remain a tractor and its nature will not change. In this case, insurance policy was issued for tractor and additional premium of Rs. 12/- has been taken for a trailer. In this case, deceased were walking on the road when the tractor with trailer dashed against the deceased and the injured. Apex Court held that the deceased and injured are third party and were not passengers in the vehicle.
16. On the question whether the insurance company is liable to indemnify the gratuitous passengers travelling in a trailer of a tractor and whether such passengers will be treated as "third party". On one hand, claimants and owner of the vehicle have argued that the third party would mean passengers travelling in a tractor whereas on the other hand, this proposition was seriously contested by the insurance company. Insurance company submitted that if accident occurs and the victim who is not travelling in the same vehicle will be third party, but gratuitous passengers travelling in the trolley of the tractor will not be third party and insurance company is not liable to indemnify such passengers.
17. Section 145(g) of the Act defines "third party". It defines that the "third party" includes the Government. It would mean that other than the contracting parties to the insurance policy, the expression "third party" should include everyone, be it a person travelling in another vehicle, one walking on the road or a passenger in the vehicle itself which is the subject- matter of the insurance policy. Every insured takes out an insurance policy against a third party risk and enters into a contract with insurer only with the motive, intention and purpose of covering the risks which may arise in relation to claims lodged against him by a third party. Insurer agreeing to issue insurance policy thereby undertakes to insure the insured and indemnify him against all risks in relation to all claims lodged against him by third party. It will not be proper to narrow the scope and ambit of the word "third party" and exclude the passengers from the operation and purview which would not only defeat the very purpose of taking out the insurance policy, but the very object of the Motor Vehicles Act which makes it mandatory requirement of law that all vehicles/owners of the vehicles must be compulsorily insured against third party risk.
18. We are in full agreement with the Division Bench judgment of this Court in the case of Usha Jain (supra), where the word "third party" is defined and it is held that in the context of the provision contained in Chapter VIII of the scheme of insurance with regard to motor vehicles it may well be understood by the words "third party" that they include persons and Government other than the insurer and insured. Section 94 provides that no person shall use except as a passenger or cause or allow any other person to use a motor vehicle in a public place without an insurance as provided in the Act. Only exception made in Sub-section (2) is in respect of Government vehicles and vehicles of local authorities and State transport undertakings. Therefore, it is held that third party will be a party other than insurer and insured. We hold that third party will include the passengers in the vehicles not travelling for hire or reward. Once it is held that the passenger is travelling for hire or reward in any vehicle other than public service vehicle or in breach of conditions of Section 95 (2) of the Motor Vehicles Act, insurance company is not liable to indemnify third party otherwise, insurance company is liable to indemnify such passenger.
19. In the case of New India Insurance Co. v. Kamla (supra), the Apex Court has considered the implication arising out of Sub-section (4) and its proviso together with Section 149 of the Motor Vehicles Act, 1988 and has held that the provisions are intended to safeguard the interest of the insurer who otherwise is not liable to pay any amount to the insured, but for the provisions contained in Chapter XI of the Act. This would mean that the insurance company has to pay to the third parties only on account of the fact that a policy of insurance has been issued in respect of the vehicle, but the insurer is entitled to recover any such sum from the insured if the insurer were not otherwise liable to pay such sum to the insured by virtue of the conditions of the contract of insurance indicated by the policy.
20. .. We have heard Counsel for the parties. Admittedly claim petitions are arising out of three categories of cases. For category No. (i) where date of accident is under the Motor Vehicles Act, 1939 it shall be governed by Section 95 of the Act as held in the case of New India Assurance Co. v. Satpal Singh, (2000) 1 SCC 237 and the insurance company is liable to indemnify the insurer and recover the amount from the owner. Question of third party risk and the liability of the insurance company is considered by the Apex Court in the case of New India Assurance Co. Ltd. v. Kamla [2002(2) M.P.H.T. 340 (SC) - 2001 ACJ 843]. Apex Court has held in Para 25 of the judgment as under:--
"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, in any breach of policy conditions on account of the vehicle being driven without a valid driving licence. Learned Counsel for the insured contended that it is enough if he establishes that he made all due 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 insurer to pay that amount to the insured. 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."
21. Though this case relates to the accident where the driver of the vehicle did not possess valid licence, yet the Apex Court while considering the amendment in Section 149(2) and import of the language has held that at the instance of the legislature that a motor vehicle can be used in a public place only if that vehicle is covered by a policy of insurance is not for the purpose of promoting the business of the insurance company but to protect the members of the community who become sufferers on account of accidents arising from use of motor vehicles. This statutory protection would have remained only a paper protection if the compensation awarded by the Courts were not recoverable by the victims (or dependents of the victims) of the accident. This is the raison d'etre for the legislature making it prohibitory for motor vehicles being used in pubic places without covering third party risks by a policy of insurance.
22. Thus, even if there is violation of condition of policy and the vehicle is driven by a person not having a valid licence, in that event, the Apex Court while considering the amendment in the year 1994 held that the insurance company will be liable to indemnify the victim in the event of accident. While considering the amendment in the Motor Vehicles Act, 1988 it is laid down in the case of New India Assurance Co. Ltd. v. Kamla (supra), that if the vehicle is used for the purpose other than for which it is insured other than the conditions mentioned in Section 149(2) of the Motor Vehicles Act, the insurance company is liable to indemnify the victim and will be entitled to recover the amount from the insured pointing out the breach of the conditions of policy. In other words, insurance company will be absolved of its liability if the vehicle is being driven in breach of the conditions under Section 149(2) of the Motor Vehicles Act, 1988.
23. Reference is answered and it is held that the judgment in the case of Pushpadevi (supra) lays down the correct law in respect of the accidents which have occurred after 1994 amendment in the Motor Vehicles Act.
24. Appeal be placed before the Bench for further orders.