Karnataka High Court
The Oriental Insurance Co Ltd vs Annemma W/O Late Iranna Javalgi & Ors on 23 November, 2017
Author: Rathnakala
Bench: Rathnakala
1
R
IN THE HIGH COURT OF KARNATAKA
KALABURAGI BENCH
DATED THIS THE 23RD DAY OF NOVEMBER 2017
BEFORE
THE HON'BLE MRS. JUSTICE RATHNAKALA
M.F.A.No.201484/2016 (MV)
BETWEEN:
The Oriental Insurance Co. Ltd.,
Through its Divisional Manager,
Through its Divisional Office,
NG Complex 1st Floor,
Opp. Mini Vidhana Soudha,
Gulbarga.
... Appellant
(By Sri S.S.Aspalli, Advocate)
AND:
1. Annemma W/o Late Iranna Javalgi,
Age: 57 years, Occ: Household,
2. Gurubai D/o Iranna Javalgi,
Age: 27 years, Occ: Household,
3. Sidramappa S/o Iranna Javalgi,
Age: 40 years, Occ: Coolie,
2
All R/o Aurad (K) village
Tq. & Dist. Gulbarga-585101.
4. Sharanu S/o Mallappa Pujari,
Age: Major, Occ: Owner of the Motor Cycle,
R/o KEB Qtrs. Jewargi,
Dist. Gulbarga-585101.
... Respondents
(By Sri Bapugouda Siddappa, Adv. for C/R1 to R3;
Notice to R4 is served, unrepresented)
This Miscellaneous First appeal is filed under
Section 173(1) of the Motor Vehicle Act, praying to set
aside the judgment and award dated 28.06.2016 in MVC
No.942/2014 passed by II Addl. Senior Civil Judge & MACT
Kalaburagi, by allowing the above appeal in the interest of
justice and equity.
This appeal coming on for final hearing this day, the
Court delivered the following:
JUDGMENT
This is an insurer's appeal aggrieved by the judgment and award passed by the II Additional Senior Civil Judge & MACT, Kalaburagi, (hereinafter referred to as 'the Tribunal' for short) whereby while allowing the claim petition filed by the respondent Nos.1 to 3 (claimants hereinafter). The appellant/insurer is directed to satisfy the award.
32. The crucial question raised in this appeal is, whether the Tribunal was justified to indemnify the Insured/Appellant to satisfy the claim of the third party though there was gross violation on the part of the owner in driving the vehicle without a license to drive the said vehicle and thereby causing the accident.
3. Learned counsel for the appellant Sri S.S.Aspalli, submits that the respondents are the widow and children of deceased Iranna who died in the vehicular accident dated 23.01.2013 due to rash and negligent driving of motor cycle bearing Reg.No.KA-32-Y-
1544. Jurisdictional police registered a case against the owner / respondent No.4 and after enquiry charge sheet is submitted against him and the said fact is brought on record before the Tribunal by the claimants itself. The owner of the vehicle though appeared before the Court through his counsel did not contest the claim thereafter. A full fledged enquiry was held. The Tribunal though found that the accident was due to rash and negligent driving of 4 the motorcycle by its owner, fastened the liability against the Insurance company, despite the insurer brought on record that the owner of the vehicle did not possess driving licence to drive the motorcycle. The insurer had produced the copy of the legal notice issued to the owner calling upon him to produce the driving licence. Copy of the said legal notice and a postal endorsement marked were as Ex.R3 to Ex.R5. There was a clear breach of contract between insured and the insurer to bind over the insurer to the terms of the contract of insurance. Policy/ Ex.R1 was required for the owner to establish that he holds valid driving license to drive the vehicle. As per schedule of premium of Ex.R1, a claim is not admissible, even if driving license is found to be fake or not valid. In the absence of the driving license, the Insurance company deserves be absolved of its liability from answering the claim.
4. In reply, Sri Bapugouda Siddappa, learned counsel for the respondents/claimants while seeking to 5 maintain the judgment and award of the Tribunal placed reliance on the judgment of the this Court reported in 2008 (3) Kar R 119 in the matter of National Insurance Co. Ltd., vs. M.R.Shantamma and others.
Subsequently followed by another judgment of Co-ordinate Bench of this Court in MFA No.30712/2011 (MV), The Branch Manager, The Oriental Insurance Company Limited vs. Parubai and others, wherein the insurer was directed to pay the compensation and recover the amount from the insured.
5. Learned counsel also places a reported judgment of a Co-ordinate Bench of this Court reported in 2017 Kant M.A.C. 364 (Kant) - The Manager, IFFCO Tokio General Insurance Co. Ltd. vs. Basavaraj and another, in which the contention of the insurer that "the driver of the goods carrying commercial vehicle had no valid and effective driving license at the time of the accident" was brushed aside and the appeal was dismissed. The learned counsel further placed his strong 6 reliance on the following judgments of the Apex Court;
2008 AIR SCW 3251 - Oriental Insurance Company vs. Zahrulnisha and others, 2008 AIR SCW 5416 -
Samundra Devi and others vs. Narendra Kour and others and Punam Devi vs. Divisional Manager, New India Assurance Company Limited - Civil Appeal No.7191/2002. DD February 12, 2004, 2004-AIR (SC)-0-1742/2004-SCC-3-386.
6. In the light of the above all, on an empathetic consideration of the question unfolded, I find the following:
The first cited case, it was an instance of a owner of the motor bike driving the motor bike without a license to drive a motor vehicle though he had a license for driving heavy motor vehicle. Though on facts it was observed:-
"18. In the light of the above-settled proposition of law, the appellant-insurance company cannot be held liable to pay the amount of compensation to the claimants for the cause of death of Shukurullah in road accident which had occurred due to rash and negligent 7 driving of scooter by Ram Surat who admittedly had no valid and effective licence to drive the vehicle on the day of accident. The scooterist was possessing driving licence of driving HMV and he was driving totally different class of vehicle which act of his is in violation of Section 10(2) of the MV Act."
- following the judgment of three Judge Bench of the Apex Court in the case of National Insurance Company Ltd., vs. Swaran Singh and Others reported in (2004) 3 SCC 297 which extensively dealt with the meaning, application and interpretation of various provisions of the Motor Vehicles Act and ruled that liability of insurer to satisfy the decree passed in favour of a third party is statutory. Though it was held that the insurer is not liable to pay amount of compensation and satisfy the award, however, was directed to recover the said amount with interest from the owner of the vehicle who had not contested the claim.
7. In the second cited judgment of Samundra Devi case (supra), the Apex Court in the matter of third party claim though held that in certain situation the insurer would not be liable to reimburse the insurer, the proposition of 'pay and recover' followed by the High Court 8 was not the subject that fell for consideration of their Lordships. It was about reduction of compensation in the appeal filed by the claimant though neither the owner nor the driver had challenged the quantum awarded by the Tribunal.
8. In the third cited judgement of Punam Devi's case (supra), the appeal filed by the insurer challenging its liability fastened by the Tribunal was allowed by the letters patent Bench and the matter was remanded back upon framing issues for determination by the learned Single Judge. The matter when taken before the Full Bench, it was noticed that the insurer had not led any evidence to show that the driver of the vehicle had no license, it was upon the insurer, which it failed to discharge. In the light of the above, the order of the Division Bench was held erroneous in allowing the letters patent appeal.
99. In the case of Swaran Singh (supra) the Larger Bench of the Apex Court considered the consequences of the driver not 'duly licensed', 'not holding licence', 'licence held but validity expired', 'licence not held for type of vehicle being driven', 'learner's licence held', in juxtaposition to the right of the third party, for compensation and the extent of liability of the insurer in terms of Section 149(1) of the Motor Vehicles Act (for short 'the Act'). After elaborate discussion, findings were summed up at paragraph-110 as below:
"110. The summary of our findings to the various issues as raised in these petitions is as follows:
(i) Chapter XI of the Motor Vehicles Act, 1988 providing compulsory insurance of vehicles against third party risks is a social welfare legislation to extend relief by compensation to victims of accidents caused by use of motor vehicles. The provisions of compulsory insurance coverage of all vehicles are with this paramount object and the 10 provisions of the Act have to be so interpreted as to effectuate the said object.
(ii) An insurer is entitled to raise a defence in a claim petition filed under Section 163 A or Section 166 of the Motor Vehicles Act, 1988 inter alia, in terms of Section 149(2)(a)(ii) of the said Act.
(iii) The breach of policy condition e.g., disqualification of driver or invalid driving licence of the driver, as contained in sub-
Section (2)(a)(ii) of Section 149, has to be proved to have been committed by the insured for avoiding liability by the insurer. Mere absence, fake or invalid driving licence 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 the 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 a duly licensed driver or one who was not disqualified to drive at the relevant time.
11(iv) The insurance companies, 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.
(v) The court cannot lay down any criteria as to how the said burden would be discharged, inasmuch as the same would depend upon the facts and circumstances of each case.
(vi) Even where the insurer is able to prove breach on the part of the insured concerning the policy condition regarding holding of a valid licence by the driver or his qualification to drive during the relevant period, the insurer would not be allowed to avoid its liability towards the insured unless the said breach or breaches on the condition of driving licence is/are so fundamental as are found to have contributed to the cause of the accident. The Tribunals in interpreting the policy conditions would apply "the rule of main purpose" and the concept of "fundamental 12 breach" to allow defences available to the insurer under section 149(2) of the Act.
(vii) The question, as to whether the owner has taken reasonable care to find out as to whether the driving licence produced by the driver (a fake one or otherwise), does not fulfil the requirements of law or not will have to be determined in each case.
(viii) If a vehicle at the time of accident was driven by a person having a learner's licence, the insurance companies would be liable to satisfy the decree.
(ix) The claims tribunal constituted under Section 165 read with Section 168 is empowered to adjudicate all claims in respect of the accidents involving death or of bodily injury or damage to property of third party arising in use of motor vehicle. The said power of the tribunal is not restricted to decide the claims inter se between claimant or claimants on one side and insured, insurer and driver on the other. In the course of adjudicating the claim for compensation and to decide the availability of defence or defences to the 13 insurer, the Tribunal has necessarily the power and jurisdiction to decide disputes inter se between the insurer and the insured. The decision rendered on the claims and disputes inter se between the insurer and insured in the course of adjudication of claim for compensation by the claimants and the award made thereon is enforceable and executable in the same manner as provided in Section 174 of the Act for enforcement and execution of the award in favour of the claimants.
(x) Where on adjudication of the claim under the Act the tribunal arrives at a conclusion that the insurer has satisfactorily proved its defence in accordance with the provisions of Section 149(2) read with sub- section (7), as interpreted by this Court above, the Tribunal can direct that the insurer is liable to be reimbursed by the insured for the compensation and other amounts which it has been compelled to pay to the third party under the award of the tribunal. Such determination of claim by the Tribunal will be enforceable and the money found due to the insurer from the insured will be recoverable on a certificate issued by the tribunal to the Collector in the 14 same manner under Section 174 of the Act as arrears of land revenue. The certificate will be issued for the recovery as arrears of land revenue only if, as required by sub-section (3) of Section 168 of the Act the insured fails to deposit the amount awarded in favour of the insurer within thirty days from the date of announcement of the award by the tribunal.
(xi) The provisions contained in sub- section (4) with the proviso thereunder and sub-section (5) which are intended to cover specified contingencies mentioned therein to enable the insurer to recover the amount paid under the contract of insurance on behalf of the insured can be taken recourse to by the Tribunal and be extended to claims and defences of the insurer against insured by relegating them to the remedy before regular court in cases where on given facts and circumstances adjudication of their claims inter se might delay the adjudication of the claims of the victims."
10. The Division Bench of this Court in the case of the Oriental Insurance Co., Ltd., vs. 15 Sri.K.C.Subramanyam and Another reported in ILR 2012 KAR 5241, raised following points for it's consideration:
"When the insurance company establishes its case under Section 149(2) by proving one of the grounds mentioned in sub-Section (i)(a)(b) of Section 149(2) and is entitled to avoid its liability to the insured,
(a) is it entitled to avoid its liability to the third party also? Or
(b) whether the insurance company has to pay the amount awarded to the third party and recover it from the insured?"
11. The Division Bench deciphered the Authorities relied by both sides, at Paragraphs-61 and 62, observed thus :
"61. Therefore, as we understand, the Apex Court has held that if the insurer establishes the defence available to him under Section 149(2) of the Act, he has a right to avoid the liability and he is under no obligation to pay the third party and then recover from 16 the insured. Therefore, the contention that even if the insurer has proved the defence available to him under Section 149(2) of the Act, for the last 53 years, the Supreme Court has been consistently directing the insurer to pay and recover and the doctrine of stare decisis is attracted is without any substance. The Supreme Court has not laid down any law to that effect.
62. Unfortunately, in spite of the aforesaid judgments, still confusion prevails about the liability of the insurance company, the power of the Court and Tribunal to issue directions regarding "pay and recover".
Therefore, it is our endeavour to notice the relevant provisions of the Act interpret them and state what is the law as is clear from the aforesaid statutory provisions and in the light of the aforesaid judgments, so that, the Tribunals would be in a better position to appreciate these aspects. In fact in this context, we are reminded of the observations of the Apex Court in SWARAN SINGH's case, where it has been held that with a view to construe a statute the scheme of the Act has to be taken into consideration. For the said 17 purpose the entire Act has to be read as a whole and then chapter by chapter, section by section and word by word. Keeping the aforesaid principle dealing with interpretation of statutes we have attempted to construe the statutory provisions."
12. Then the Division Bench scanned through the scheme under the Act under Chapter XI/XII of the Act, dwelled upon requirements of policies and limits of liability contemplated under Section 147 of the Act with the corresponding duty of insurer to satisfy Judgments and Awards against persons insured in respect of third party risks enshrined by Section 149 of the Act in the light of principles laid by the Apex Court in [1] British India General Insurance Co., Ltd., vs. Captain Itbar Singh and Others reported in AIR 1959 SC 1331 [2] National Insurance Co., Ltd., Chandigarh vs. Nicolletta Rohtagi and Others reported in 2002 (7) SCC 456 [3] National Insurance Co., Ltd., vs. Swaran Singh and others reported in 2004 ACJ 1, returned it's findings as below :
18"81. Therefore, what follows is that if the case falls under sub-sections (4) and (5) of Section 149, there is liability on the part of the Insurance Company to satisfy the decree at the first instance and then recover the amount paid in excess from the owner. This is the law which is holding the field for a long time. There cannot be any deviation. But if the case falls under sub-section (2) read with sub-section (7) of Section 149, if the insurer establishes his defences under Section 149(2), then there is no binding precedent holding the field which enables the Tribunal or this Court to direct the Insurance Company to satisfy the decree at the first instance and to recover the awarded amount from the owner or driver thereto. On the contrary in Swaran Singh's case, the Apex Court has explicitly stated that the directions issued by them in the said case to pay and recover may not be considered as a precedent."
82. From the above discussion, what follows is:-
(a) If the vehicle involved in the accident is duly insured and the insurer has 19 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 shoes of the insured 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 20 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.
(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 precedent 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 21 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 cases, which fall under Sub-Section (4) and (5) of Section 149 only.
(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 cases 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 purport 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 22 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.
(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.
23(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."
13. Finally, the appeal filed by the insurer challenging the liability fastened against it by the Tribunal to pay the compensation to the claimant and then recover the amount from the insurer was set aside and the appeal was allowed.
14. An identical point arose for consideration before the coordinate Bench of this Court in the matter of Sri Appaayachari vs. K.Vadivel & Another reported in ILR 2014 KAR 2358. In the said case also, the driver of the offending vehicle was shown not having driving licence 24 to drive the transport vehicle. The Tribunal fixed the liability on the owner of the offending vehicle by absolving the insurer of its liability. The learned Single Judge after detailed discussion and following the judgment of the Division Bench of this Court (supra) considered the proposition of pay and recover and answered the issue in favour of the insurer and against the claimants.
15. Returning to the case on hand, the insurer had issued a notice to the owner of the vehicle to furnish his driving license, which he failed. It is not as if owner is not aware of the claim, he appeared before the Tribunal through his counsel however, did not participate thereon.
There cannot be any more negligence on the part of the owner of the vehicle to ride his vehicle without a licence.
The jurisdictional police have held him entirely responsible for the accident and have charge sheeted him.
16. It is a clear case of breach of the terms of the contract with the insurer. The insurer pleaded it's defence and produced the copy of notice issued to the owner 25 calling upon him to produce his license. The owner maintaining silence without responding to the notice of the insurer by itself is sufficient proof of defence though without any effort to prove the negative i.e., absence of valid driving license. Valid defence statutorily available under Section 149(1) of the Act having raised and established the insurer is under no liability to indemnify the insurer's risk to the third party. At the same time, there can not be any order against the Insurance Company to satisfy the third party claim and then recover from the owner in the light of the ruling of the Division Bench of this Court.
17. The appeal is allowed. The judgment of the Tribunal insofar directing the appellant/Insurance Company to pay compensation amount to the claimants is set aside. It is made clear that the respondents/claimants are entitled to recover the compensation amount from the owner of the vehicle/fourth respondent.
26Registry to refund the amount deposited by the appellant/Insurance Company in this case.
Sd/-
JUDGE sn/snc/Srt