Andhra HC (Pre-Telangana)
A.T.V.S. Prasad vs United India Insurance Co. Ltd. on 10 September, 1987
Equivalent citations: 1(1989)ACC151
Author: K. Ramaswamy
Bench: K. Ramaswamy
JUDGMENT K. Ramaswamy, J.
1. Appellant is the owner of APW 1665, a lorry covered by insurance policy Exh. A-1, dated 27-6-1976. An accident has occurred on July 29, 1976, in which an employee of the Central Government was knocked down by the driver of the lorry whereat he died. Proceedings were initiated in C.C. No. 571 of 1976 on the file of the court of the II Addl. Judicial First Class Magistrate, Guntur, for an offence under Section 304-A, Indian Penal Code. The driver was convicted for rash and negligent driving of the vehicle on 6-5-1977. Subsequently, the legal representatives of the deceased laid O.P. No. 14 of 1977 on the file of the Motor Accidents Claims Tribunal, Guntur and a decree for a sum of Rs. 30,000/- and odd was granted by judgment Exh. A-5, dated February 8, 1978. The respondent discharged the liability pursuant to the contract of insurance under Exh. A-1 and filed a suit for recovery of the amount from the appellant owner of the vehicle. The trial court decreed the suit.
2. The case of the appellant is that he had insured the vehicle under Exh. A-1 for premium and having agreed to indemnify the damages that may be caused to him in the event of an accident and having discharged the liability, it is not open to the respondent to seek refund of the payment made pursuant to the award of the Claims Tribunal under Exh. A-5. The contention of the insurance company is that under the contract of insurance one of the conditions is that the policy holder shall give notice of the accident immediately on occurrence thereof. But in this case the appellant has committed breach of the condition and became liable to reimburse the amounts paid by the respondent pursuant to the order under Exh. A-5. The court below after framing appropriate issues held that the appellant is liable to pay the amount as he committed breach of the contract of insurance Exh. A-1. Thus this appeal.
3. Mr. Vittal, learned Counsel for the appellant, has contended that Under Section 95 of the Motor Vehicles Act (Act 4 of 1939) (for short 'the Act') the appellant has insured the vehicle. The respondent having accepted the insurance, the object of which is only to indemnify the holder in respect of the damages that may be caused in an accident, and having undertaken to discharge the same, it is no longer open to it to seek refund of the liability covered under the policy Exh. A-1. Mr. Venkat Reddy, learned Counsel for the insurance company, contended that the liability Under Section 95 is in terms of the contract and one of the covenants in the contract is to issue a notice of the accident immediately after its occurrence to the insurance company and that the appellant has admittedly failed to issue notice and thereby committed breach thereof. Accordingly the appellant is liable to refund the amount. It is further contended that several notices have been issued calling upon the appellant to refund the amount but he did not refund the same. Therefore, the respondent was constrained to file the suit.
4. In view of the respective contentions, the question that arises for consideration is whether the respondent is entitled to seek reimbursement of the amount paid pursuant to the contract under Exh. A-1. In order to appreciate the same, it is necessary to consider the relevant provisions of Section 95. Section 95(1) reads as follows:
95. Requirements of policies and limits of liability-(1) In order to comply with the requirements of this Chapter, a policy of insurance must be a policy which-
(a) is issued by a person who is an authorised insurer or by a co-operative society allowed Under Section 108 to transact the business of an insurer; and
(b) insures the person or classes of persons specified in the policy to the extent specified in Sub-section (2)-
(i) against any liability which may be incurred by him in respect of the death of or bodily injury to any person or damage to any property of a third party caused by or arising out of the use of the vehicle in a public place.
5. Sub-section (2) specifies the extent of liability which is not relevant for the purpose of this case.
Sub-section (5) provides:
Notwithstanding anything elsewhere contained in any law, a person issuing a policy of insurance under this section shall be liable to indemnify the person or classes of persons specified in the policy in respect of any liability which the policy purports to cover in the case of that person or those classes of persons.
6. A conjoint reading of all these provisions clearly discloses that the liability of the insurance company would arise in a case where the policy is covered Under Sub-section (1) read with Sub-section (2) of Section 95 of the Act, when a person insures under the policy to the extent specified in Sub-section (2) against any liability which may be incurred by him in respect of death or bodily injury to any person or damages to any property of third person caused by or arising out of the use of the vehicle in a public place. Sub-section (5) states that notwithstanding anything contained in any law, the insurance company shall be liable to indemnify the person or classes of persons mentioned in the policy in respect of any liability which the policy purports to cover in the case of that person or those classes of peasons.
7. Thus it is clear that once a policy is issued by the insurance company covering any person or classes of persons who are entitled to be indemnified against the death or bodily injury to any person or damage to any property of third party caused by or arising out of the use of the vehicle in a public place, the object of insurance is to get indemnification of any damage that may be caused to any third party arising out of the use of the vehicle in a public place in an accident causing death or bodily injury to that third party or damage to any property of the third party. Admittedly under Exh. A-1, contract of insurance was taken. The appellant was contracted to indemnify any damage that may be caused out of the use of his vehicle in a public place by his driver. It is an admitted fact that the death of third party has taken place out of the use of the vehicle in a public place and the vehicle was being driven by the driver of the appellant. Accordingly damages have been awarded by the Claims Tribunal and the respondent was a party to the proceedings and he indemnified the appellant. The question then is whether the respondent is entitled to seek reimbursement of the damages so paid. The only clause on which stress was laid is the absence of issuance of notice by the respondent. The relevant clause reads as follows:
Nothing in this policy or any endorsement thereon shall affect the right of any person indemnified by this policy or any other person to recover an amount under or by virtue of the provisions of the Motor Vehicles Act, 1939, Section 96.
But the insured shall repay to the company all sums paid by the company which the company would not have been liable to pay but for the said provisions.
8. The covenant regarding notice reads thus:
Notice shall be given in writing to the company immediately upon the occurrence of any accident or loss or damage and in the event of any claim and thereafter the insured shall give all such information and assistance as the company shall require. Every letter, claim, writ, summons or process shall be forwarded to the company immediately on receipt by the insured. Notice shall also be given in writing to the company, immediately the insured shall have knowledge of any impending prosecution, inquest or fatal injury in respect of any occurrence which may give rise to a claim under this policy. In case of theft or other criminal act which may be the subject of a claim under this policy the insured shall give immediate notice to the police and cooperate with the company in securing the conviction of the offender.
9. A reading of these provisions clearly shows that once a policy is issued the respondent is liable to indemnify under the policy to the appellant. But a rider has been added that the insured shall repay to the company all sums paid by the company which the company would not have been liable to pay but for the said provisions. In this case the accident has occurred while using the vehicle at a public place. Admittedly, the contract of insurance covers the liability. Therefore, the clause does not apply and the insurance company cannot recover this amount because it was not otherwise than under the policy.
10. Then the next question is whether the non-issuance of notice would put an end to the contract and absolve the liability. A reading of the clauses does not give any such right. The object of issuance of notice is to make known to the insurance company of the accident occurred and to take necessary follow-up steps to have the matter referred to the Motor Vehicles Inspector or the assessor to assess the damages in order to meet any action that would be laid Under Section 110-A of the Act. But in the absence of any specific covenant in the contract to put an end to the con tract as is usually found in the life insurance policy if the contract was obtained by fraud or misrepresentation, it is always open to the insurance company to impose all reasonable conditions which are not opposed to the public policy. But having not specified any such covenant, it is not open to the insurance company to seek reimbursement of the amount paid pursuant to the policy.
11. The very object of insurance will be defeated if the argument of the insurance company is accepted. Therefore, the court below has committed grievous error in decreeing the suit. The appeal is allowed; the suit is dismissed. But in the circumstances each party is directed to bear their own costs.