Gujarat High Court
United India Insurance Co.Ltd vs Minor Mahesh Kanubhai & 2 on 7 April, 2014
Author: Harsha Devani
Bench: Harsha Devani
C/FA/710/2007 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
FIRST APPEAL NO.710 of 2007
With
FIRST APPEAL NO.711 of 2007
TO
FIRST APPEAL NO.713 of 2007
With
FIRST APPEAL NO.3852 of 2008
FOR APPROVAL AND SIGNATURE:
HONOURABLE MS. JUSTICE HARSHA DEVANI
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1 Whether Reporters of Local Papers may be allowed to see
the judgment?
2 To be referred to the Reporter or not?
3 Whether their Lordships wish to see the fair copy of the
judgment?
4 Whether this case involves a substantial question of law as
to the interpretation of the Constitution of India, 1950 or any
order made thereunder?
5 Whether it is to be circulated to the civil judge?
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UNITED INDIA INSURANCE CO.LTD.....Appellant(s)
Versus
MINOR MAHESH KANUBHAI & 2....Defendant(s)
=============================================
Appearance:
First Appeal No.710/2007 to 713/2007
MR GC MAZMUDAR, ADVOCATE for the Appellant(s) No.1
MR HG MAZMUDAR, ADVOCATE for the Appellant(s) No.1
RULE SERVED for the Defendant(s) No.2 - 3
First Appeal No.3852/2008
MR SUNIL PARIKH, ADVOCATE for the Appellant(s) No.1
MR HEMAL SHAH, ADVOCATE for MR PANKAJ DESAI, ADVOCATE for the
Defendant(s) No.1
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CORAM: HONOURABLE MS. JUSTICE HARSHA DEVANI
Date : 07/04/2014
Page 1 of 114
C/FA/710/2007 JUDGMENT
COMMON ORAL JUDGMENT
1. Since common questions of law are involved in all these appeals under section 173 of the Motor Vehicles Act, 1988 (hereinafter referred to as "the Act") the same were taken up for hearing together and are disposed of by this common judgment.
2. First Appeals No.710/2007 to 713/2007 are directed against the common judgment and award dated 31 st May, 2006 passed by the Motor Accident Claims Tribunal (Auxiliary), Rajkot (hereinafter referred to as "the Claims Tribunal") in Claim Case No.1205/1996, 1207/1996, 1208/1996 and 1218/1996 and First Appeal No.3852/2008 which has been preferred by the insurance company, is directed against the judgment and award dated 29th November, 2007 passed by the Motor Accident Claims Tribunal (Auxiliary), Rajkot in Motor Accident Claim Petition No.2259/1999.
3. A brief outline of the facts which have given rise to the first appeals may be referred to.
3.1 First Appeal No.3852/2008: The claimant filed a claim petition under section 166 of the Act before the Claims Tribunal stating that on 8th February, 1999, deceased Chandrakantbhai was travelling in a Matador Tempo bearing No.GJ.5T-2312 along with his goods. The driver of the Matador was driving the same with excessive speed and in a rash and negligent manner so as to endanger human life and when they reached the Dhaduli - Lakhpat road, the driver lost control over Page 2 of 114 C/FA/710/2007 JUDGMENT the vehicle which turned turtle. The deceased suffered serious injuries on account of the accident and succumbed to the same. The claimant claimed Rs.4,00,000/- by way of compensation under different heads. Before the Claims Tribunal it was the case of the appellant-insurance company that the deceased was travelling as a gratuitous passenger in a goods vehicle and hence, the insurance company is not liable to indemnify the insured. The Claims Tribunal in paragraph 28 of the impugned award has discussed the issue and expressed the view that though the insurance company was not liable for that act, but it is liable on behalf of the owner to pay the compensation to the third party, viz., the petitioner and the insurance company may recover it from the owner and it would be treated as a decree in favour of the insurance company. Accordingly, it held the owner, driver and the appellant- insurance company jointly and severally liable to pay the compensation to the claimant.
3.2 First Appeals No.710/2007 to 713/2007: Claim petitions being Claim Case No.1208 of 1996, 1205 of 1996, 1206 of 1996, 1207 of 1996, 1218 of 1996 and 1219 of 1996 came to be filed before the Claims Tribunal in connection with a vehicular accident which took place on 30 th September, 1996 at 8:00 p.m. at village Samadhiyala, taluka Khambha, District Amreli, involving a tractor bearing No.GAO - 6007 whereby one Parvatiben Tejabhai succumbed to the injuries sustained by her and died, in relation to which, her heirs and legal representatives filed Claim Case No.1208 of 1996, whereas the claimants of the other claim cases sustained serious injuries. Before the Claims Tribunal, on behalf of the appellant- insurance company it was contended that the insurance policy Page 3 of 114 C/FA/710/2007 JUDGMENT had been obtained in respect of the tractor only and the vehicle involved in the accident is a tractor. The policy covers only the risk of the driver. The tractor is not a goods vehicle and there is no question of carrying passengers; the deceased and the injured claimants were travelling on the mudguard of the wheels of the tractor and therefore, the insurance company is not liable to indemnify the owner. The Claims Tribunal, placed reliance upon the decision of the Supreme Court in the case of National Insurance Company Ltd. v. Swaran Singh, 2004 ACJ 1 and held that there is a breach of policy, but insofar as the award of compensation is concerned, at the first instance, the insurance company has to satisfy the award and then recover the awarded amount from the owner of the tractor. The Claims Tribunal, accordingly, held that the claimants were entitled to recover the compensation awarded by it from all the opponents therein, including the appellant- insurance company, jointly and severally.
4. At the outset, it may be noted that the main issue involved in the present case is as to whether in a case where the insurance policy obtained in respect of the offending vehicle is an "Act only" policy and the claim petitions are filed by or in respect of gratuitous passengers travelling in a goods vehicle or other vehicle and the Claims Tribunal comes to the conclusion that the insurance company is not liable, it is thereafter permissible for the Claims Tribunal to direct the insurance company to first satisfy the award and then recover such amount from the insured/owner. Having regard to the significance of the issue involved, the learned counsel who appear on behalf of the insurance companies as well as claimants before this court on a regular basis, had requested Page 4 of 114 C/FA/710/2007 JUDGMENT that they be afforded an opportunity of addressing the court on the issue. Accordingly the court has also heard the learned Advocates, both, on behalf of insurance companies as well as claimants, who are otherwise not appearing in these appeals.
5. Mr. Sunil Parikh, learned advocate appearing on behalf of the appellant in First Appeal No.3852/2008 and Mr. H.G. Mazmudar, learned advocate appearing on behalf of the appellant in First Appeals No.710/2007 to 713/2007 submitted that in the present cases, the Claims Tribunal after having come to the conclusion that the insurance company was not liable under the insurance policy, has made an order to pay and recover, in other words, the insurance company should pay the compensation to the claimants and thereafter recover the same from the owner. It was submitted that the controversy involved in the present cases is no longer res integra, inasmuch as, this court (Coram: Honourable the Chief Justice Mr. Bhaskar Bhattacharya) has, in the case of United India Insurance Company Ltd. v. Lilaben w/o Decd. Bhikhabhai Premjibhai Kathiriya rendered in First Appeal No.2121/2008 on 18th November, 2013, held that the direction to pay the amount first and then to recover such amount can only be given in exercise of power conferred under Article 142 of the Constitution and that there is no scope of passing such a direction either at the instance of the Claims Tribunal or of the High Court in an appeal under section 173 of the Act. It was submitted that the controversy involved in the present case stands squarely covered by the said decision and hence, the appeals are required to be allowed.
6. Vehemently opposing the appeals, Mr. Mehul Shah, Page 5 of 114 C/FA/710/2007 JUDGMENT learned counsel appearing on behalf of the claimants in First Appeal No.3852/2008 drew the attention of the court to the scheme of the Act, to point out that Chapter XI thereof makes provision for insurance of motor vehicles against third party risks. It was pointed out that in view of the provisions of section 147 of the Act, in case where there is an insurance policy, apart from there being a contractual liability, there is a statutory liability cast upon the insurance company. Reference was made to section 149 of the Act which bears the heading "Duty of insurers to satisfy judgments and awards against persons insured in respect of third party risks" to submit that section 149 of the Act imposes an obligation upon the insurer to satisfy the judgment and award that may be passed against the insured in respect of any such liability as is required to be covered by the policy. It was submitted that sub-section (2) of section 149 of the Act stipulates the permissible grounds of defence that the insurance company may take in a claim petition filed under the Act and that the defences which the insurance company can take are limited to the ones specifically enumerated in sub-section (2) of section 149 of the Act. Once the insurer is joined as a party in the claim petition, only certain statutory defences are available to it. According to the learned counsel, once it is found that there is a policy in the prescribed form, which fits into the contours of sub-section (3) of section 147 of the Act, sub-section (5) of section 147 and section 149 come into play. According to the learned counsel, the insurance policy may be a restricted one, it may mention various exclusions; there may be contractual or statutory exclusions, however, if the same meets with the requirements of section 147 of the Act, section 149(4) would come into play and the policy would cover third parties, and consequently, Page 6 of 114 C/FA/710/2007 JUDGMENT even if either statutorily or contractually, there are any conditions imposed as regards coverage of the policy, all those conditions have to be ignored for the purpose of fastening the liability on the insurer. It was submitted that the legislature was not oblivious to the above, but had the intent that the same should not act to the detriment of the victim, for whose benefit, the insurance was taken and, therefore, the proviso to sub-section (4) of section 149 came to be enacted. It was argued that it was only because of sub-section (4) of section 149 of the Act that despite the policy being restricted by reference to any conditions other than those in clause (b) of sub-section (2) thereof, that the insurer becomes liable to pay the amount to the victim and is thereafter permitted to recover the same from the insured. It was further submitted that sub- section (5) of section 149 of the Act envisages that in case the insurer, in view of the provisions of the said section, becomes liable to pay any amount in respect of the liability incurred by the insured person, in excess of the amount under the policy in respect of such liability, the insurance company would be entitled to recover the such excess amount from the insured. Thus, sub-section (5) of section 149 of the Act also gives an indication that even though, beyond a limit, there is no liability of the insurance company, it is still liable to pay the victim or his/her heirs, as the case may be, and recover the excess amount from the insured. It is only because of section 149 of the Act that the insurer is made compulsorily liable to firstly pay the compensation to the claimants and thereafter recover the same from the insured. It was submitted that both the above situations cover the liability of the insured beyond the liability and beyond the coverage. Referring to sub-section (7) of section 149 of the Act, it was pointed out that avoidance by Page 7 of 114 C/FA/710/2007 JUDGMENT the insurance company of the liability to the beneficiary of the award is only on the grounds mentioned in sub-section (2). Once a claimant gets a judgment in his favour, the insurer cannot avoid his liability except in the manner provided under sub-section (2) of section 149. It was urged that the said sub- section is couched in a very wide language, viz. there can be no avoidance except under sub-section (2) of section 149 of the Act and that a wholesome reading of section 149 of the Act shows that it provides only for limited defences, which otherwise would have been there had it been a normal insurance.
6.1 It was submitted that while section 149 of the Act covers third parties and subjects the insurer to satisfy the judgment and award against persons insured in respect of third party rights, persons who are travelling as gratuitous passengers would also fall within the ambit thereof. In support of his submission, the learned counsel placed reliance upon the decision of the Supreme Court in the case of New India Assurance Co. Ltd. v. Rula and others, 2000 ACJ 630, for the proposition that the manifest object of Chapter XI of the Act is to ensure that the third party, who suffers injuries due to the use of the motor vehicle, may be able to get damages from the owner of the vehicle and recoverability of the damages may not depend on the financial condition or solvency of the driver of the vehicle who had caused the injuries. Whether the premium has been paid or not, if on the date of the accident, there was a policy of insurance in respect of the vehicle in question, the third party would have a claim against the insurance company and the owner of the vehicle would have to be indemnified with respect to the claim of that party. It was Page 8 of 114 C/FA/710/2007 JUDGMENT submitted that in the facts of the said case, the cheque issued towards payment of premium had been dishonoured and so the insurance policy itself was cancelled, despite which, the Supreme Court held the insurance company liable to indemnify the insured. Referring to paragraph 9 of the said decision, it was pointed out that the court had held that any contract of insurance under Chapter XI of the Motor Vehicles Act, 1988 contemplates a third party who is not a signatory or a party to the contract of insurance but is, nevertheless, protected by such contract. It was submitted that thus, a contract of insurance under Chapter XI of the Act contemplates a third party who is not a signatory or party to the contract but is the person for whose benefit the contract was entered into. Thus, once there is a certificate of insurance issued under sub- section (3) of section 147, sub-section (4) of section 149 would be attracted and by virtue of the proviso thereto, the insurer can recover any sum paid by him towards discharge of any liability of any person who is covered by the policy by virtue of the said sub-section. Referring to sub-section (4) of section 149 of the Act, it was submitted that the words "so much of the policy" means so much of the entire policy, that is, the coverage of the policy. It was argued that any person who is not a party to the contract of insurance under Chapter XI is a third party and would, therefore, be covered by the provisions of the said Chapter. Referring to sub-section (2) of section 149, it was submitted that except on the grounds enumerated in clause (b) thereof, there can be no other ground for avoidance of the policy by the insurer. It was pointed out that the insurance coverage under an 'Act only' policy would cover only such risks as are contemplated under section 147 of the Act and would not cover other risks which are not statutory, to Page 9 of 114 C/FA/710/2007 JUDGMENT submit that sub-section (4) of section 149 of the Act, says that any restriction in a policy with reference to any conditions other than those in clause (b) of sub-section (2) of section 149 shall be of no effect and hence, if any risk is not covered by the insurance policy, the same would amount to restricting the cover qua the liability of the parties who are not signatories to the contract. According to the learned counsel, if the coverage clause qua third parties is restricted under the policy and the insurance certificate is issued under section 147(1)(b) of the Act, there is a restriction qua not covering third parties otherwise not required to be statutorily covered, and consequently, in view of sub-section (4) of section 149 of the Act, such restriction would have no effect and the insurance company would be liable to pay the compensation to the claimants and thereafter recover the same from the insured. It was submitted that the provisions of Chapter XI have been inserted in order to protect the members of the community travelling in vehicles or using the roads from the risk attendant upon the user of motor vehicles on the road. Having regard to the noble object of the Act, the provisions made for furtherance of such object are required to be construed liberally and the rule of purposive construction is required to be adopted. It was urged that labourers travelling in a vehicle are not even aware as to whether or not they are protected by the insurance policy. They too belong to a class of the community travelling in vehicles for whose benefit the provisions have been enacted. Therefore, non-coverage of risk of such passengers also amounts to a restriction not specified in clause
(b) of sub-section (2) of section 149 of the Act.
6.2 Reliance was placed upon the decision of the
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C/FA/710/2007 JUDGMENT
Supreme Court in the case of New Asiatic Insurance Co. Ltd. v. Pessumal Dhanamal Aswani and others, AIR 1964 SC 1736 wherein it has been held that it appears from the heading of Chapter VIII of the Act of 1939 (corresponding to Chapter XI of the Act of 1988), that it makes provision for insurance of the vehicle against third party risks, that is to say, its provisions ensure that third parties who suffer on account of the user of the motor vehicle would be able to get damages for injuries sustained and that their ability to get the damages for injuries suffered and that their ability to get the damages will not be dependent on the financial condition of the driver of the vehicle whose user led to the causing of the injuries. The provisions have to be construed in such a manner as to ensure this object of the enactment.
6.3 Reference was made to the decision of the Supreme Court in the case of Oriental Insurance Co. Ltd. v. Inderjit Kaur and others, 1998 ACJ 123, wherein the court has held that by reason of the provisions of section 147(5) and 149(1) of the Act, the insurance company becomes liable to indemnify third parties in respect of the liability which that policy covered and to satisfy awards of compensation in respect thereof notwithstanding its entitlement to avoid or cancel the policy for the reason that the cheque issued in payment of the premium thereon had not been honoured. The court held that the policy of insurance that the insurance company had issued was a representation upon which the authorities and the third parties were entitled to act. The insurance company was not absolved of its obligations to third parties under the policy because it did not receive the premium. Its remedies in this behalf lay against the insured.
Page 11 of 114C/FA/710/2007 JUDGMENT 6.4 The decision of the Supreme Court in the case of
National Insurance Co. Ltd. v. Baljit Kaur and others, AIR 2004 SC 1340, was cited to submit that in the facts of the said case also, the Supreme Court after coming to the conclusion that it was not the intention of the Legislature to provide for the liability of the insurer with respect to passengers, especially gratuitous passengers, who were neither contemplated at the time the contract of insurance was entered into, nor any premium was paid to the extent of the benefit of insurance to such category of people, still however, in the interest of justice, directed the insurance company to satisfy the awarded amount in favour of the claimants, if not satisfied and recover the same from the owner of the vehicle. It was submitted that the said direction had not been issued in exercise of powers under Article 142 of the Constitution of India.
6.5 Reference was made to the decision of the Supreme Court in the case of National Insurance Co. Ltd. v. Swaran Singh and others, AIR 2004 SC 1531, wherein the Supreme Court after considering various earlier decisions in this regard, had held that sub-section (5) of section 149 which imposes a liability on the insurer must also be given its full effect. The insurance company may not be liable to satisfy the decree and, therefore, its liability may be zero but it does not mean that it did not have initial liability at all. Thus, if the insurance company is made liable to pay any amount, it can recover the entire amount paid to the third party on behalf of the assured. If this interpretation is not given to the beneficent provisions of the Act, having regard to its purport and object, one fails to see Page 12 of 114 C/FA/710/2007 JUDGMENT a situation where beneficent provisions can be given effect to. The insurance company should indemnify the injured and thereafter recover the amount from the insured.
6.6 Strong reliance was placed upon the decision of the Supreme Court in the case of United India Insurance Co. Ltd. v. K.M. Poonam & Ors., 2011 (2) Scale 568. It was pointed out that in the facts of the said case, the court was aware that the liability of the insurance company, if any, for payment of compensation would be limited to the number of passengers validly permitted to be carried in the vehicle covered by the insurance policy and did not extend to the number of passengers carried in excess of the permitted number. It was submitted that though it was a case of gratuitous passengers, the Supreme Court held that the liability of the insurance company to make payment even in respect of persons not covered by the insurance policy continues under the provisions of sub-section (1) of section 149 of the Act, as it would be entitled to recover the same if it could prove that one of the conditions of the policy had been breached by the owner of the vehicle. It was submitted that thus, even after recording a finding that the insurance company was not liable to pay compensation in excess of the persons covered by the insurance policy, the court had directed the insurance company to deposit the total amount of compensation awarded in favour of the claimants and to recover the amounts paid by it, in excess of its liability, from the owner of the vehicle by putting the decree into execution. It was submitted that even in such a case, the Supreme Court has followed its earlier decision in the case of Baljit Kaur and has ordered the insurance company to pay the compensation Page 13 of 114 C/FA/710/2007 JUDGMENT and recover the same from the insurance company.
6.7 The decision of the Supreme Court in the case of Manager, National Insurance Co. Ltd. v. Saju P. Paul and Another, 2013 (1) Scale 66, was cited wherein the Supreme Court, after holding that the High Court was wrong in holding that the insurance company shall be liable to indemnify the owner of the vehicle and pay compensation to the claimant as directed in the award by the Claims Tribunal and after referring to its decisions in the case of Baljit Kaur (supra), National Insurance Co. Ltd. v. Challa Bharathamma and Others, (2004) 8 SCC 517, National Insurance Company Limited v. Kaushalaya Devi and Others, (2008) 8 SCC 246 etc. as well as the pending reference before the Supreme Court in National Insurance Co. Ltd. v. Roshan Lal and another and National Insurance Co. Ltd. v. Parvethneni and another, observed that the pendency of consideration of the questions regarding liability of the insurance company to pay any amount which it was held to be non-liable does not mean that the course that was followed in Baljit Kaur and Challa Bharathamma should not be followed. It was pointed out that the Supreme Court in the facts of the said case after holding that the insurance company was not liable, had permitted the claimants to withdraw the amount deposited by the insurance company with liberty to the insurance company to recover the amount so paid from the owner.
6.8 Once again, referring to sub-section (1) of section 149, it was submitted that the same provides a complete liability of the insurance company to pay the amount under the award irrespective of whether it could have avoided the Page 14 of 114 C/FA/710/2007 JUDGMENT liability. It was submitted that sub-section (2) of section 149 of the Act permits only those defences specified under sub- section (2) thereof and not any other defences. It was further submitted that sub-section (7) of section 149 of the Act clearly restricts defences that can be raised by the insurance company to only those under sub-section (2) of section 149. It was submitted that the scheme of Chapter XI is to see that third parties or parties who are not parties to the contract are not left high and dry and get the benefit of the award passed. Referring to the provisions of sections 150, 152 and 156 of the Act, it was pointed out that the entire scheme of the Act reveals that the legislature has tried to protect all victims of accidents whether they all are covered under the insurance policy or otherwise.
6.9 The attention of the court was drawn to section 165 of the Act which makes provision for "Claims Tribunals" to point out that the Tribunals are constituted for the purpose of adjudicating upon claims for compensation in respect of accidents involving the death or bodily injury to persons arising out of the use of motor vehicles or damages to any property of third party so arisen. It was submitted that thus, the expression "third party" is used only qua damage to property and not in respect of persons. Therefore, any person, other than the person who is a party to the insurance policy, would be covered by the provisions of section 165, section 147 as well as provisions of Chapter XI of the Act. Reference was made to the decision of the Supreme Court in the case of Motor Owners' Insurance Company Limited v. Jadavji Keshavji Modi and Others, (1981) 4 SCC 660, wherein the court while construing the provisions of sections 95, 93D and 94 of the Act Page 15 of 114 C/FA/710/2007 JUDGMENT of 1939 held that the purpose of law is to alleviate, not augment, the sufferings of the people. The court must avoid a construction to produce an unfair result, if it can do so without doing violence to the language of the section. In matters involving third party risks, it is subjective considerations which must prevail and the occurrence has to be looked at from the point of view of those who are immediately affected by it. There is no table of logarithms to guide or govern statutory construction in this area, which leaves a sufficient and desirable discretion for the judges to interpret the laws in the light of their purpose, where the language used by the law- makers does not yield to one and one meaning only.
6.10 Reliance was placed upon the decision of the Supreme Court in the case of Skandia Insurance Co. Ltd. v. Kokilaben Chandravadan and Others, (1987) 2 SCC 654, wherein the court had observed that in order to divine the intention of the legislature in the course of interpretation of the relevant provisions there can scarcely be a better test than that of probing into motive and philosophy of the relevant provisions keeping in mind the goals to be achieved by enacting them. Ordinarily, it is not the concern of the legislature whether the owner of the vehicle insures his vehicle or not. If the vehicle is not insured, any legal liability arising on account of third party risk will have to be borne by the owner of the vehicle. Despite which, the legislature has insisted on a person using a motor vehicle in a public place to insure against third party risk by enacting section 94. Such obligation has not been imposed in order to promote the business of the insurers engaged in the business of automobile insurance. The provision has been inserted in order to protect the members of Page 16 of 114 C/FA/710/2007 JUDGMENT the community travelling in vehicles or using the roads from the risk attendant upon the user of motor vehicles on the roads. Mr. Shah submitted that thus, the provisions of the Motor Vehicles Act are required to be read and interpreted in the light of the principles laid down in the above two decisions having regard to the object and purpose of the Act.
6.11 Reliance was also placed upon the decision of the Supreme Court in the case of G. Govindan v. New India Assurance Co. Ltd., (1999) 3 SCC 754, for the proposition that both, under the old Act as well as under the new Act, the Legislature was anxious to protect the third party's (victim's) interest. Since insurance against third party risks is compulsory, once the insurer company had undertaken liability to third parties incurred by the persons specified in the policy, the third party's right to recover any amount under or by virtue of the provisions of the Act is not affected by any condition in the policy.
6.12 Reference was made to the decision of the Supreme Court in the case of Guru Govekar v. Miss Filomena F. Lobo and Others, (1988) 3 SCC 1, for the proposition that once the insurer has issued a certificate of insurance in accordance with sub-section (4) of section 95 of the Act of 1939, the insurer has to satisfy any decree which a person receiving injuries from the use of the vehicle insured has obtained against any person insured by the policy. The court held that the insurer was liable to pay the compensation found to be due to the claimant as a consequence of the injuries suffered by her in a public place, on account of the car colliding with her on account of the negligence of the mechanic who had been engaged by the Page 17 of 114 C/FA/710/2007 JUDGMENT repairer, who had undertaken the repair of the vehicle, by virtue of the provisions contained in section 94 of the Act which 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, unless there is in force in relation to the use of the vehicle by that person or that other person, as the case may be, a policy of insurance complying with the requirements of Chapter VIII of the Act. Any other view would expose innocent third parties to go without compensation when they suffer injury on account of such motor accidents and would defeat the very object of introducing the necessity of taking out insurance policy under the Act. The attention of the court was also drawn to the contents of paragraph 6 of the said judgment.
6.13 It was, accordingly, submitted that the law as laid down with respect to the Motor Vehicles Act is to the effect that it has to give benefit to injured victims and heirs of deceased victims and that it has to be interpreted for that purpose. It was submitted that the policy conditions have to be read in the context of third parties and what the statute intends to cover cannot be taken away by conditions of the policy. If the insurer wants to impose a condition in the policy which restricts the right of any victim, such condition is against the insured and would not, in any way, diminish the rights of the third parties under the said policy. The attention of the court was drawn to the decision of the Supreme Court in the case of Saju Paul (supra) and more particularly, paragraph 25 thereof, to point out that the Supreme Court after specifically recording a finding that the High Court was wrong in holding that the insurance company shall be liable to indemnify the owner of Page 18 of 114 C/FA/710/2007 JUDGMENT the vehicle and pay the compensation to the claimant as directed in the award by the Claims Tribunal, directed that the claimant may be allowed to withdraw the amount deposited by the insurance company before it along with accruing interest with liberty to the insurance company to recover the amount from the owner. It was submitted that neither in the said decision nor in the case of Baljit Kaur (supra) as well as Challa Bharathamma (supra) did the Supreme Court exercise powers under Article 142 of the Constitution. It was argued that the benefit of the provisions of section 149 of the Act should not be restricted only to third parties, otherwise the same would do injustice to unsuspecting passengers travelling in a goods vehicle, who had no other option but to travel in such vehicle as there is no other mode of transport available to them and they on account of ignorance are not aware that the risk is not covered under the policy. It was submitted that, therefore, a liberal view is required to be adopted and the provisions of section 149 of the Act are required to be interpreted in a manner in which the risk of all victims is covered under the policy.
7. Mr. Hemal Shah, learned advocate for Mr. Pankaj Desai, learned advocate for the respondent No.1 in First Appeal No.3852/2008 adopted the submissions advanced by Mr. Shah. The learned advocate, in addition to the decisions that were cited by Mr. Shah, placed reliance upon the decision of the Bombay High Court in the case of New India Assurance Co. Ltd. v. Sindhu and others, 2013 ACJ 1126 , wherein it was held that there is a consistency in the view that the directions to the insurance company to pay compensation awarded and thereafter, recover the same from the owner of the vehicle Page 19 of 114 C/FA/710/2007 JUDGMENT were issued by the Apex Court on consideration of the relevant provisions of the Motor Vehicles Act and not in exercise of powers under Article 142 of the Constitution of India. Reliance was also placed upon the decision of the Allahabad High Court in the case of Oriental Insurance Company Ltd. v. Chandra Devi, 2012 ACJ 567 (Allahabad), wherein the court after referring to various decisions of the Supreme Court in Oriental Insurance Company Ltd. v. Inderjit Kaur, National Insurance Company Ltd. v. Swaran Singh, National Insurance Company Ltd. v. Laxmi Narain Dhut and Prem Kumari v. Prahlad Dey (supra) has held that the Claims Tribunal did not commit any illegality in directing the insurance company to make deposit of the amount of compensation and recover the same from the insured person, that is, the owner of the vehicle in question. Reliance was also placed upon the decision of the Supreme Court in the case of New India Assurance Co. Ltd. v. Vimal Devi and others, 2010 ACJ 2878. The decision of the Andhra Pradesh High Court in United India Insurance Company Ltd. v. N. Appireddy, 2013 ACJ 545, was cited wherein the court set aside the finding recorded by the trial court that the insurance company is liable to pay compensation to the claimants and held that the owner of the vehicle shall be liable to satisfy the award. However, following the ratio in Baljit Kaur's case, the court directed the insurance company to satisfy the awarded amount and then recover from the owner of the vehicle by initiating a proceeding before the Executing Court without filing a separate suit for the said purpose. It was, accordingly, urged that the Supreme Court as well as the different High Courts have been consistently following the practice of directing the insurance company to first pay the compensation to the claimants and thereafter Page 20 of 114 C/FA/710/2007 JUDGMENT recover the same from the insured without having to institute a separate suit for recovery thereof.
8. Mr. M.T.M. Hakim, learned advocate though not appearing in the present appeals, addressed the court on behalf of the claimants. It was submitted that the issue that arises for consideration before this court is as to whether the insurer is statutorily liable qua gratuitous passengers in a goods vehicle and if not, then whether the insurer can be directed to pay compensation and recover the same from the insured. It was submitted that in the light of the decisions of the Supreme Court in the case of Mallawwa (Smt) and Others v. Oriental Insurance Co. Ltd. and Others, (1999) 1 SCC 403 and New India Assurance Co. Ltd. v. Asha Rani and Others, (2003) 2 SCC 223, unarguably, the issue of statutory liability qua gratuitous passengers in goods vehicles has been decided. It was submitted that the decision of this court in the case of United India Insurance Company Ltd. v. Lilaben (supra) on which reliance had been placed on behalf of the insurance companies has been rendered without reference to the provisions of section 149 of the Act and more particularly sub-sections (4) and (5) thereof, whereby even in case it is held that the insurance company is entitled to avoid its liability under the policy, it is statutorily made liable to pay compensation to the claimants and then recover the same from the insured/owner and as such the decision is per incuriam as having been rendered without taking into consideration the relevant statutory provisions. It was argued that in any case, the said decision does not lay down the correct proposition of law and hence, the same may either be required to be held to be per incuriam or be referred to a larger Page 21 of 114 C/FA/710/2007 JUDGMENT bench.
8.1 It was submitted that the Motor Vehicles Act is a benevolent and social welfare legislation, framed and implemented to protect the victims of accidents/third parties and not to protect the interests of either the insured or the insurer and is, therefore, required to be interpreted accordingly. It was submitted that three-judge benches of the Supreme Court in other decisions rendered in the context of section 96 of the Act of 1939 and section 149 of the Act of 1988 have held that the said provisions provide protection to the victims of accidents/third parties. Reference was made to the decision of the Supreme Court in the case of British India General Insurance Co. Ltd. v. Captain Itbar Singh and others, AIR 1959 SC 1331, Skandia Insurance Co. Ltd. v. Kokilaben Chandravadan and Others, (1987) 2 SCC 654, Motor Owners' Insurance Company Limited v. Jadavji Keshavji Modi and Others, (1981) 4 SCC 660, Sohan Lal Passi v. P. Sesh Reddy and Others, (1996) 5 SCC 21, National Insurance Co. Ltd., Chandigarh v. Nicolletta Rohtagi and Others, (2002) 7 SCC 456, National Insurance Co. Ltd. v. Swaran Singh and others, (2004) 3 SCC 297 as well as a decision of the Full Bench of this court in the case of New India Assurance Co. Ltd. v. Kamlabehn Wd/o.
Sultansinh Hakumsinh Jadav and Others, 1993 (1) G.L.H.
961. It was submitted that the purposive interpretation as laid down in the above decisions has explained the principle of payment by the insurer to the victims of accidents who are also referred to as third parties and to recover the same from the insured. Further, the said interpretation is uniformly applied to diverse categories and not restricted to victims of the Page 22 of 114 C/FA/710/2007 JUDGMENT accidents on road and is also applied to victims of accidents travelling in the vehicle. To do otherwise, that is, not to apply the said purposive interpretation to the victims travelling in the vehicle, would be adding additional defence to section 96(2) of the Act of 1939 and 149(2) of the Act of 1988 and treating the said class of victims differently and discriminately, only on account of the fortuitous event of meeting with the accident while being carried in the vehicle, which would clearly be in violation of Article 14 of the Constitution. It was submitted that the Supreme Court in the case of National Insurance Co. Ltd. v. Swaran Singh (supra) has given a detailed analysis and interpretation of section 149(4) and (5) of the Act of 1988 which would apply with the same force to section 96(4) and (5) of the Act of 1939. Therefore, the interpretation as explained and propounded by the Supreme Court in the said decision is required to be applied with the same force qua all victims of accidents either travelling in the vehicle or on the road. The attention of the court was drawn to various decisions of the Supreme Court to point out that under different eventualities; the Supreme Court had uniformly applied the proposition of pay and recover. It was pointed out that in Skandia Insurance Company (supra) and Swaran Singh (supra), though the cases fell within the exclusion clause in the policy and defence under section 96(2) of the Act of 1939 and 149(2) of the Act of 1988, the Supreme Court had still directed the insurer to pay and thereafter recover the amount from the insured. In United India Insurance Co. Ltd. v. K.M. Poonam and others, 2011 ACJ 917 and National Insurance Co. Ltd. v. Tulna Devi and others, 2009 ACJ 581, though the vehicle was carrying passengers in excess of the number of passengers permitted, which was beyond the terms of the contract, the Page 23 of 114 C/FA/710/2007 JUDGMENT Supreme Court had applied the principle of pay and recover. Similarly, in United India Insurance Company Limited v. Santro Devi and Others, (2009) 1 SCC 558, though the insured had died and it was contended on behalf of the insurance company that on account of the death of the insured, there was no subsisting contract, the Supreme Court had still directed the insurer to pay the amount. In Oriental Insurance Co. Ltd. v. Inderjit Kaur and others, (1998) 1 SCC 371, though the cheque issued for payment of premium had been dishonoured and, consequently, there was no completed contract, the Supreme Court still applied the above principle, which was reiterated in United India Insurance Company Limited v. Laxmamma and Others, (2012) 5 SCC
234. In Guru Govekar (supra), though there was no liability under the law of torts, the court held the insurance company to be statutorily liable. It was submitted that the scope and ambit of section 149 of the Act of 1988 and the ratio of Swaran Singh has been explained in National Insurance Co. Ltd. v. Laxmi Narain Dhut, (2007) 3 SCC 700, wherein it is held that other than insurer/owner of the vehicle, all others are third parties and entitled to the benefit as per Swaran Singh's case. It was urged that it is settled law that the liabilities of the insurer under section 96 of the Act of 1939 and 149 of the Act of 1988 are statutory liabilities arising from the statutory contract of insurance between the insured and the insurer to protect the victims of accidents and, therefore, the same cannot be applied in the manner as applicable in relation to a contract of insurance simpliciter. It was submitted that the distinctive nature of a statutory contract of insurance and a contract of insurance simpliciter has been explained in Santro Devi (supra).
Page 24 of 114C/FA/710/2007 JUDGMENT 8.2 Next it was submitted that the defences available to
the insurer fall within the scope and ambit of section 96(2) of the Act of 1939 and 149(2) of the Act of 1988 and that in view of the decisions of the Supreme Court in Itbar Singh (supra) and Nicolletta Rohtagi (supra), the insurer can only avail of the defences as provided under the said sub-sections and not in addition thereto. Moreover, in Inderjit Kaur (supra) and Guru Govekar (supra), the scope and ambit of section 149 of the Act of 1988 in relation to "issuance of certificate" and, therefore, liability, notwithstanding the contract of insurance is also explained and held in favour of the victims of accidents/third parties, holding the insurer liable to pay the compensation to the victims of the accident/third party. It was submitted that the same principle is applied and followed even qua passengers carried in goods vehicle albeit without mentioning the provisions of the Act in the case of Challa Bharathamma, Baljit Kaur and Saju P. Paul (supra).
8.3 As regards the contention that in cases relating to passengers travelling in a goods vehicle, the direction for payment to victims of accidents and recovering the same from the insured has been issued by the Supreme Court in exercise of the powers under Article 142 of the Constitution, it was submitted that such directions have been issued by the Supreme Court in view of the settled and uniformly applied law under section 96 of the Act of 1939 and 149 of the Act of 1988. Referring to various decisions of the Supreme Court in this regard, it was pointed out that the Supreme Court has not made any reference to the exercise of powers under Article 142 of the Constitution, to submit that under the Page 25 of 114 C/FA/710/2007 JUDGMENT circumstances, to presume otherwise would be adding words to the directions of the Supreme Court.
8.4 In the aforesaid backdrop, Mr. Hakim submitted that section 96 of the Act of 1939 and 149 of the Act of 1988 are independent provisions put in the statute to protect the interest of victims of accidents/third parties and thereby, the protection of the interest of insurers is only against the insured. Further, section 95 of the Act of 1939 and section 147 of the Act of 1988 and the contract of insurance and liabilities, if any thereunder, are only relevant qua the insured and insurer and the victims of the accidents/third party are merely parties to the said dispute. Therefore, the adjudication and conclusion of inter se liabilities between the insured and the insurer under section 95 of the Act of 1939 and section 147 of the Act of 1988, holding the insurer not liable, does not in any manner affect the right of the victims of the accident/third party to enforce the judgment and decree against the insurer as provided under section 96 of the Act of 1939 and 149 of the Act of 1988, particularly in view of the fact that the insurer has issued certificate of insurance and the conditions thereof do not in any manner affect the right of the victims of the accident/third party to recover compensation. According to the learned counsel, this is fortified by the fact that it is held that even if the insurer is able to establish statutory defences as available under section 96(2) of the Act of 1939 and 149(2) of the Act of 1988, even then, the insurer is not entitled to complete immunity from satisfying the judgment and decree in favour of the victims of the accident/third party. It was submitted that undisputedly, there are some decisions of Division Benches of the Supreme Court wherein it has been Page 26 of 114 C/FA/710/2007 JUDGMENT held that the insurer is not liable to pay compensation to the victims of the accident/third party by referring only to section 95 of the Act of 1939 and 147 of the Act of 1988 without reference to and considering the settled position qua section 96 of the Act of 1939 and 149 of the Act of 1988. However, having regard to the fact that three-judge benches of the Supreme Court on the same issue have taken a contrary view, it is incumbent upon this court to follow the decision of the Three-Judge Benches rather than the decision of the Division Benches of the Supreme Court. In support of such contention, reliance was placed upon the decision of the Supreme Court in the case of Mattulal v. Radhe Lal, (1974) 2 SCC 365 and Union of India v. K.S. Subramanyam, (1976) 3 SCC 677. It was submitted that the proposition of law in relation to section 96 of the Act of 1939 and section 147 of the Act of 1988 has throughout remained unaltered, confirmed and concurred. It was pointed out that the directions to pay and recover as ordered by the Claims Tribunal and High Courts have been approved and confirmed by the Supreme Court in Jawahar Singh v. Bala Jain and Others, (2011) 6 SCC 425 as well as in Kusum Lata and Others v. Satbir and Others, (2011) 3 SCC 646. It was submitted that in the case of United India Insurance Company Ltd. v. Lilaben, (supra), it was not brought to the notice of the court that the judgments referred to and cited were on different facts and circumstances. Moreover, the Supreme Court in two of its latest decisions in the case of S. Iyyapan and Saju P. Paul (supra), has, after considering the earlier case law held that the principle of pay and recover is to be followed. It was, accordingly, urged that the decision of this court in the case of United India Insurance Company Ltd. v. Lilaben does not lay down the correct proposition of law and is, Page 27 of 114 C/FA/710/2007 JUDGMENT therefore, required to be declared per incuriam or is required to be referred to the larger bench.
9. In rejoinder Mr. Vibhuti Nanavati, learned counsel made submissions on behalf of the insurance companies and invited the attention of the court to the decision of the Supreme Court in the case of Mallawwa (Smt) and Others v. Oriental Insurance Company and Others, (1999) 1 SCC 403, wherein the court has considered the scope of section 95 of the Act of 1939. Referring to the second proviso thereto, the court found that it in clear terms restricted the scope of the main provision by confining its application to that vehicle which is "a vehicle in which passengers are carried for hire or reward or by reason of or in pursuance of a contract of employment". The court observed that in the first instance, the vehicle had to be a vehicle of that class in which passengers were carried. If that was not the intention of the legislature, it would not have used the phraseology "the vehicle is a vehicle in which passengers are carried" and would have simply provided that "except where passengers are carried for hire or reward..." So also, the compulsory coverage was not intended for all passengers and, therefore, it was provided that "passengers are carried for hire or reward or by reason of or in pursuance of a contract of employment". On the question whether its decision in the case of Pushpabai Purshottam Udeshi v. Ranjit Ginning & Pressing Co. (P) Ltd., (1977) 2 SCC 745 requires reconsideration the court made reference to the following observations made in the said decision:
"The plea that the words 'third party' are wide enough to cover all persons except that person and the insurer is negatived as the insurance cover is not made available to the passengers is made clear by the proviso to the sub-Page 28 of 114
C/FA/710/2007 JUDGMENT section which provides that a policy shall not be required:
"(ii) except where the vehicle is a vehicle in which passengers are carried for hire or reward or by any reason of or in pursuance of a contract of employment to cover liability in respect of the death of or bodily injury to persons being carried in or upon or entering or mounting or alighting from the vehicle at the time of occurrence of the event out of which a claim arises.' Therefore it is not required that a policy on insurance should cover risk to the passengers who are not carried for hire or reward. As under section 95 the risk to passenger in a vehicle who is not carried for hire or reward is not required to be insured the plea of the counsel for the insurance company will have to be accepted and the insurance company held not liable under the requirements of the Motor Vehicles Act."
The court held that what was held in that case was consistent with its interpretation of section 95 as it stood before and after the amendment by Act 56 of 1969. Mr. Nanavati submitted that in the present case also the passengers were travelling in a goods vehicle which does not contemplate carrying passengers for hire or reward and therefore, under section 147 of the Act the risk to the passenger who is carried in such a vehicle is not required to be insured and hence, the insurance company cannot be held liable.
9.1 The learned counsel referred to the decision of a three-Judge Bench of the Supreme Court in the case of New India Assurance Co. Ltd. v. Asha Rani and Others, AIR 2003 SC 607, to point out that the Supreme Court, in view of the changes in the relevant provisions of the Act of 1988 vis-a- vis the Act of 1939, was of the opinion that the meaning of the words "any person" must be attributed having regard to the context in which they have been used that is, "a third party".
Page 29 of 114C/FA/710/2007 JUDGMENT That, keeping in view the provisions of the Act of 1988, the court was of the opinion that as the provisions thereof do not enjoin any statutory liability on the owner of a vehicle to get his vehicle insured for any passenger travelling in a goods vehicle, the insurer would not be liable therefor. It was further pointed out that in the present case the offending vehicle is a tractor. Reference was made to the Rules of Road Regulations, 1989 and more particularly to rule 28 thereof which bears the heading 'Driving of tractors and goods vehicles' and lays down that a driver when driving a tractor shall not carry or allow any person to be carried on tractor. A driver of goods carriage shall not carry in the driver's cabin more number of persons than that is mentioned in the registration certificate and shall not carry passengers for hire and reward. It was submitted that therefore, by virtue of rule 28, there is a prohibition against the driver in taking passengers in a tractor more than the number specified in the driver's cabin. Thus, the very act of taking more passengers than permissible in law is contrary to the provisions of the rules.
9.2 Reference was made to the decision of the Supreme Court in the case of Deddappa & Ors. v. Branch Manager, National Insurance Co. Ltd., 2008 (3) G.L.H. 168, which was a case wherein the insurance company had taken a plea that although the vehicle in question was insured by the owner for the relevant period, but the cheque issued having been dishonoured, the policy was cancelled and thus, it was not liable therefor. The Supreme Court held that there is no doubt that beneficial legislations should have liberal construction with a view to implementing the legislative intent but where such beneficial legislation has a scheme of its own, there is no Page 30 of 114 C/FA/710/2007 JUDGMENT warrant for the court to travel beyond the scheme and extend the scope of the statute on the pretext of extending the statutory benefit to those who are not covered by the scheme. Mr. Nanavati submitted that the gratuitous passengers in any vehicle, including a goods carriage, are not statutorily covered under section 147(3) of the Act and as such, there is no warrant for the court to travel beyond the scheme and extend the statute on the pretext of extending the statutory benefit to gratuitous passengers who are not covered by the scheme.
9.3 Reference was made to the decision of the Supreme Court in the case of Pushpaben v. M/s. Ranjit Jinning and Pressing Company Ltd., (1977) 2 SCC 745, for the proposition that section 95 of the Motor Vehicles Act, 1939, provides that a policy of insurance must be a policy which insures the person against any liability which may be incurred by him in respect of death 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. The section however also provides in it provided that it is not required that a policy of insurance should cover the risk to passengers who are not carried for hire or reward. Therefore, the statutory insurance does not cover injury suffered by passengers who are not carried for hire or reward and hence the insurer cannot be held liable. Referring to the decision of the Supreme Court in the case of National Insurance Co. Ltd. v. Swaran Singh (supra), it was submitted that the said decision would not be applicable to the facts of the present case, inasmuch as, the said decision arose in a case where the contention on behalf of the insurance company was to the effect that the driver of the offending vehicle did not have a valid driving licence.
Page 31 of 114C/FA/710/2007 JUDGMENT 9.4 Reliance was placed upon the decision of the
Supreme Court in the case of National Insurance Company Limited v. Geeta Bhat and Others, (2008) 12 SCC 426, for the proposition that the liability of an insurer to reimburse the insured as an owner of the vehicle not only depends upon the terms and conditions laid down in the contract of insurance but also the provisions of the Motor Vehicles Act, 1988. The owner of the vehicle is statutorily obligated to obtain insurance for the vehicle to cover the third party risk. A distinction has to be borne in mind in regard to a claim made by the insured in respect of damage of his vehicle or filed by the owner or any passenger of the vehicle as contradistinguished from a claim made by a third party. Reliance was placed upon the decision of the Supreme Court in the case of New India Assurance Company Ltd. v. Asha Rani, AIR 2003 SC 607, wherein the court has held that in view of the changes in the relevant provisions in the Act of 1988 vis-a-vis the Act of 1939, the meaning of the words "any person" must also be attributed having regard to the context in which they have been used i.e. 'a third party'. Keeping in view the provisions of the Act of 1988, the court was of the opinion that as the provisions thereof do not enjoin any statutory liability on the owner of a vehicle to get his vehicle insured for any passenger travelling in a goods vehicle, the insurers would not be liable therefor. Reliance was placed upon the decision of the Supreme Court in the case of Baljit Kaur (supra) for the proposition that although the owner of the goods or his authorised representative would now be covered by the policy of insurance in respect of a goods vehicle, it was not the intention of the legislature to provide for the liability of the insurer with Page 32 of 114 C/FA/710/2007 JUDGMENT respect to passengers, especially gratuitous passengers who were neither contemplated at the time the contract of insurance was entered into, nor any premium was paid to the extent of the benefit of insurance to such category of people. The decision of the Supreme Court in the case of New India Assurance Co. Ltd. v. Vedwati and others, 2007 ACJ 1043, was cited wherein the court had held that the difference in the language of 'goods vehicle' as appearing in the old Act and 'goods carriage' in the new Act is of significance. A bare reading of the provisions makes it clear that the legislative intent was to prohibit goods vehicle from carrying any passenger. This is clear from the expression 'in addition to passengers' as contained in the definition of 'goods vehicle' in the old Act. This position becomes further clear because the expression used is 'goods carriage' which is solely for the carriage of goods. Carrying of passengers in a goods carriage is not contemplated in the Act. There is no provision similar to clause (ii) of the proviso appended to section 95 of the old Act prescribing requirement of insurance policy. Even section 147 of the Act mandates the compulsory coverage against death of or bodily injury to any passenger of 'public service vehicle'. The proviso makes it further clear that the compulsory coverage in respect of drivers or conductors of public service vehicle and employees carried in goods vehicle would be limited to liability under the Workmen's Compensation Act, 1923. There is no reference to any passenger in 'goods carriage'. The inevitable conclusion, therefore, is that the provisions of the Act do not enjoin any statutory liability on the owner of a vehicle to get his vehicle insured for any passenger travelling in a goods carriage and the insurer would have no liability therefor.
Page 33 of 114C/FA/710/2007 JUDGMENT 9.5 Reference was made to the decision of a Full Bench
of the Madras High Court in the case of Branch Manager, United India Insurance Co. Ltd. v. Nagammal and others, 2009 ACJ 865, wherein the question which was referred to the Full Bench was as to whether the insurer can be directed to pay compensation to the claimant in cases where the deceased and/or the injured was travelling as a gratuitous passenger in a goods vehicle and recover the same thereafter from the owner of such goods vehicle. The court after referring to various decisions of the Supreme Court on the question of interpretation of the provisions of section 149 and 147 of the Act, held that the Supreme Court in the case of Baljit Kaur (supra), even though the statutory provision under section 149(4) and section 149(5) was not applicable, applied the doctrine of 'pay and recover'. It was held that the ratio of the said decision has been applied selectively in some of the later decisions and in some of the subsequent decisions, the doctrine of 'pay and recover' in respect of matters which are not strictly covered under section 149(4) and 149(5) has not been applied by the Supreme Court depending upon the facts and circumstances of a particular case. Therefore, it cannot be said as an inexorable principle of law that in each case where the law in respect of a passenger in a goods vehicle, which is not required to be covered under section 147 of the Act, the insurance company would be directed to first pay the amount and thereafter recover the same from the owner and such discretion is obviously with the court either to apply such principle or not. The court, inter alia, held that the insurance company is required to cover the liability envisaged under section 147, but wider risk can always be undertaken. Section Page 34 of 114 C/FA/710/2007 JUDGMENT 149 envisages the defences which are open to the insurance company. Where the insurance company is not successful in its defence, it is required to satisfy the decree and the award. Where it is successful in its defence, it may yet be required to pay the amount to the claimant and thereafter recover the same from the owner under such circumstance envisaged and enumerated in section 149(4) and section 149(5). Under section 147, the insurance company is not statutorily required to cover the liability in respect of a passenger in a goods vehicle unless such passenger is the owner or the agent of the owner of the goods accompanying such goods in the goods vehicle. Since there is no statutory requirement to cover the liability in respect of a passenger in a goods vehicle, the principle of 'pay and recover', as statutorily recognised in section 149(4) and section 149(5), is not applicable ipso facto to such cases and therefore, ordinarily the court is not expected to issue such a direction to the insurance company to pay to the claimant and thereafter recover from the owner.
9.6 The decision of the Supreme Court in the case of Mehboob Dawood Shaikh v. State of Maharashtra, (2004) 2 SCC 362, was cited for the proposition that a judgment should be understood in the light of the facts of that case and no more should be read into it than what it actually says. It is neither desirable nor permissible to pick out a word or a sentence from the judgment of the court divorced from the context of the question under consideration and to treat it to be complete law decided by the Supreme Court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before the court. Mr. Nanavati, accordingly, urged Page 35 of 114 C/FA/710/2007 JUDGMENT that the orders of pay and recover have been made by the Supreme Court in various decisions in the peculiar facts and circumstances of the said case. The said decisions can be treated as precedents only to the extent of the question of law decided in the same. However, mere directions issued by the Supreme Court in the concluding part of the judgments would not be precedents which are required to be followed by this court. It was submitted that in the decision of this court in the case of United India Insurance Company Ltd. v. Lilaben (supra), this court has appropriately interpreted the provisions of law in respect of the liability of the insurance company qua passengers in a goods vehicle. Whereas on the other hand, the directions issued by the Supreme Court in the decisions on which reliance had been placed on behalf of the claimants, are not in the nature of any law laid down by the Supreme Court in this regard and as such, the same could not be binding precedents.
9.7 Reference was made to the decision of the Supreme Court in the case of Amrit Lal Sood and Another v. Kaushalaya Devi Thapar and Others, (1998) 3 SCC 744, to submit that in case where there is a liability under the policy, the Supreme Court has interpreted the avoidance clause. However, where there is no liability, the insurance company cannot be compelled to satisfy the award on behalf of the insured. Reference was also made to a decision of the Karnataka High Court in the case of the Oriental Insurance Co. Ltd. v. Sri K.C. Subramanyam, rendered on 12th July, 2012 in M.F.A. No.2596/2007 (MV).
10. Mr. Palak Thakkar, learned advocate also assisted Page 36 of 114 C/FA/710/2007 JUDGMENT the court by making submissions on behalf of the insurance companies. The attention of the court was invited to various provisions of the Act to explain the scheme of the Act. It was submitted that the Act does not contemplate statutory insurance coverage to gratuitous passengers travelling in a goods vehicle or any other vehicle and therefore, in such cases, once it is held that the insurance company is not liable to indemnify the insured, the doctrine of 'pay and recover' cannot be applied. According to the learned counsel, whenever, the Supreme Court in cases involving gratuitous passengers travelling in a goods or other vehicle, has issued directions to the insurance company to first pay and then recover from the insured, it has done so in exercise of its powers under Article 142 of the Constitution and hence, the said decisions cannot be treated as precedents. Reference was made to the decision of the Supreme Court in the case of Bharat Petroleum Corprn. Ltd. and Another v. N.R. Vairamani and Another, (2004) 8 SCC 579, for the proposition that courts should not place reliance on decisions without discussing as to how the factual situation fits in with the fact situation of the decision on which reliance is placed. Observations of courts are neither to be read as Euclid's theorems nor as provisions of a statute and that too taken out of their context. These observations must be read in the context in which they appear to have been stated. Judgments of courts are not to be construed as statutes. To interpret words, phrases and provisions of a statute, it may become necessary for judges to embark into lengthy discussions but the discussion is meant to explain and not to define. Judges interpret statutes, they do not interpret judgments. They interpret words of statutes; their words are not to be Page 37 of 114 C/FA/710/2007 JUDGMENT interpreted as statutes. Mr. Thakkar submitted that thus, the decisions of the Supreme Court should not be placed reliance upon without discussing the factual situation and the directions issued by the Supreme Court cannot be considered to be the ratio of the said decision. Reference was made to the decision of the Supreme Court in the case of Director of Settlements, A.P. and others v. M.R. Apparao and another, AIR 2002 SC 1598, for the proposition that the statements of the court on matters other than law like facts may have no binding force as the facts of two cases may not be similar. But what is binding, is the ratio of the decision and not any finding of facts. It is the principle found out upon a reading of a judgment as a whole, in the light of the questions before the court that forms the ratio and not any particular word or sentence. To determine whether a decision has 'declared law', it cannot be said to be a law when a point is disposed of on a concession and what is binding is the principle underlying a decision. Reference was also made to the decision of the Supreme Court in the case of Indian Bank v. ABS Marine Products (P) Ltd., (2006) 5 SCC 72, wherein the Supreme Court has observed that many a time, after declaring the law, in the operative part of the judgment, the court gives some directions which may either relax the application of law or exempt the case on hand from the rigour of the law in view of the peculiar facts or in view of the uncertainty of law till then, to do complete justice. While doing so, normally it is not stated that such direction/order is in exercise of power under Article 142. It is not uncommon to find that courts have followed not the law declared, but the exemption/relaxation made while moulding the relief in exercise of power under Article 142. When the High Courts repeatedly follow a direction Page 38 of 114 C/FA/710/2007 JUDGMENT issued under Article 142, by treating it as the law declared by the Supreme Court, incongruously, the exemption/relaxation granted under Article 142 becomes the law, though at variance with the law declared by the Supreme Court. The courts should, therefore, be careful to ascertain and follow the ratio decidendi and not the relief given on the special facts, exercising power under Article 142. One solution to avoid such a situation is for the Supreme Court to clarify that a particular direction or portion of the order is in exercise of power under Article 142.
10.1 The learned counsel submitted that on behalf of the claimants, reliance has been placed upon the operative part of the judgment wherein some directions have been given relaxing the application of law or exempting the case on hand from the rigour of law in view of the peculiar facts of the case. However, the said directions are sought to be given the colour of the ratio decidendi of the decision. It was submitted that merely because the Supreme Court while issuing such directions has not mentioned Article 142, does not mean that such powers have not been exercised. Referring to the decision of the Supreme Court in the case of National Insurance Corporation Ltd. v. Baljit Kaur (supra), it was pointed out that the question before the Supreme Court was whether an insurance policy in respect of a goods vehicle would also cover gratuitous passengers. It was submitted that the Supreme Court while holding that it was not the intent of the legislature to provide for the liability of the insurer with respect to passengers, especially gratuitous passengers, who were neither contemplated at the time the contract of insurance was entered into, nor any premium was paid to the extent of the Page 39 of 114 C/FA/710/2007 JUDGMENT benefit of insurance to such category of people, in the operative part of the judgment, passed orders directing the insurance company to satisfy the awarded amount in favour of the claimant if not already satisfied and recover the amount from the owner of the vehicle. It was submitted that such directions have been issued in order to meet the ends of justice and though there is no express reference to the power exercised by the court, such power is traceable to Article 142 of the Constitution. It was pointed out that the Supreme Court in the case of National Insurance Company Ltd. v. Bommithi Subbhayyamma (supra) while holding that the insurance company is not liable for payment of any compensation for death of a gratuitous passenger travelling in a goods vehicle, did not issue any direction for pay and recover and made it clear that the claimants would be entitled to recover the amount of compensation granted in their favour from the owner of the vehicle.
10.2 Referring to the decision of the Supreme Court in the case of New India Assurance Company Ltd. v. Vedwati, 2007 ACJ 1043, it was pointed out that the Supreme Court followed its earlier decisions in the case of Asha Rani, Baljit Kaur, Bommithi Subayya (supra) etc. and held that the provisions of the Act do not enjoin any statutory liability on the owner of a vehicle to get his vehicle insured for any passenger travelling in a goods carriage and the insurer would have no liability therefor. It was pointed out that while exonerating the insurance company, no order to pay and recover had been made. Reference was made to the decision of the Supreme Court in the case of Oriental Insurance Company Ltd v. Meena Variyal and Others, (2007) 5 SCC 428, wherein the Page 40 of 114 C/FA/710/2007 JUDGMENT court had held that based on the ratio in Swaran Singh (supra), the insurance company cannot be made liable in the case before it to pay the compensation first and recover it from the insured, the owner of the vehicle. The court held that the deceased being an employee is not covered by the Workmen's Compensation Act, of the insured, the owner of the vehicle, has not to be covered compulsorily under the Act and only by entering into a special contract by the insured with the insurer could such a person be brought under coverage. The learned counsel also place reliance upon the decisions of the Supreme Court in the case of National Insurance Company Ltd. v. Laxmi Narain Dhut, (2007) 2 SCC 700, in the case of National Insurance Company Ltd. v. Prema Devi and others, (2008) 5 SCC 403 as well as in the case of National Insurance Company Ltd. v. Kaushalaya Devi, (2008) 8 SCC 246 reference to which shall be made at an appropriate stage.
11. As noticed hereinabove, the main plank of the submissions advanced by the learned counsel for the insurance companies is that the controversy involved in the present cases is no longer res integra as the same stands concluded by the decision of this court in the case of United India Insurance Co. Ltd. v. Lilaben (supra), whereas on behalf of the claimants, it has been contended that the said decision does not lay down the correct proposition of law and is per incuriam as having been rendered without noticing the provisions of sub-sections (4) and (5) of section 149 of the Act which make provision for the insurance company to first satisfy the award and then recover the amount from the insured/owner.
Page 41 of 114C/FA/710/2007 JUDGMENT
12. The question that, therefore, arises for consideration is as to whether the provisions of section 149 of the Act would be attracted in case where a vehicular accident results in the death of or injury to gratuitous passengers travelling in a goods vehicle or any other vehicle.
13. In United India Insurance Co. Ltd. v. Lilaben rendered in First Appeal No.2121/2008, this court was considering a case where the victim was travelling in a goods vehicle and the Claims Tribunal had held that the insurance company was not liable, nevertheless, it had directed it to pay the compensation to the claimants and to execute the award against the owner of the vehicle. The court recorded that the vehicle in question was a goods vehicle and the claimants were gratuitous passengers and in the said case, no separate vehicle was involved. It was also not in dispute that the insurance in question was not a comprehensive one but covered only the third party risk. The court held that once it is found that in the said case no other vehicle was involved and the victims were travelling in a goods vehicle and the insurance company was liable for the third party risk, and there was no scope of bringing the victim within the meaning of "third party" and, therefore, the Claims Tribunal had erred in directing the insurance company to pay the amount of compensation and then recover the same from the owner. The court was of the view that the victim not being a third party, the insurance company had no liability. It was held that the Claims Tribunal erred in law in passing the direction upon the insurance company to pay the amount and then recover such amount notwithstanding its finding that the insurance company has no liability to pay the amount as victims are not Page 42 of 114 C/FA/710/2007 JUDGMENT third parties within the meaning of law. It was further held that the direction to pay the amount first and then to recover such amount can only be given in exercise of power conferred under Article 142 of the Constitution and that in Manager, National Insurance Co. Ltd. v. Saju P. Paul (supra), the Supreme Court, in the peculiar facts of the said case exercised such power notwithstanding the pendency of reference to the larger bench.
14. At the outset, it may be noted that powers exercised by the Claims Tribunal under section 166 of the Act and by the High Court in its appellate jurisdiction under section 173 of the Act are statutory powers which are governed and circumscribed by the statute. Therefore, any direction to the insurance company, to first pay the compensation awarded, and then recover such amount from the insured, has to be traceable to some power conferred by the statute. The Claims Tribunal under section 166 and the High Court under section 173 of the Act are not conferred with any extraordinary powers as vested in the High Court under Article 226 of the Constitution of India or the wide powers which the Supreme Court has under section 142 of the Constitution of India.
15. It may also be noted that no cross-objections or cross-appeals have been filed against the impugned award of the Claims Tribunal and hence, the findings of the Claims Tribunal as regards the insurance companies not being liable under the policy are not subject matter of challenge and have attained finality.
16. Thus, the question that arises for consideration in all these appeals is whether after coming to the conclusion that Page 43 of 114 C/FA/710/2007 JUDGMENT the insurance company was not liable to indemnify the insured, the Claims Tribunal was justified in holding that the insurance company is liable on behalf of the owner to pay the compensation to the third party viz. the claimants and may recover the same from the owner by considering the award to be a decree in favour of the insurance company.
17. What is manifest from the facts noted in paragraph 3 hereinabove is that, firstly all these cases are in respect of claim petitions filed by injured victims or heirs of deceased victims who were gratuitous passengers travelling in goods vehicles and other vehicles, and secondly that the insurance policies taken by the respective owners are 'Act only' policies. On behalf of the claimants, it has been submitted that all persons who are not parties to the contract are third parties within the meaning of the said expression as envisaged in Chapter XI and XII of the Act and that the expression employed in sub-section (1) of section 147 of the Act is "any person"
which would cover a gratuitous passenger in a goods vehicle or other vehicle. It is the case of the claimants that the words "third party" appear in sub-section (1) of section 147 in the context of damage to property only, whereas qua death and bodily injury, the expression used is "any person". Therefore, the expression "any person" used in sub-section (1) of section 147 of the Act cannot be construed to mean "third party" and the provisions of Chapter XI and XII of the Act have to be interpreted accordingly. This question would, therefore, be required to be addressed first.
18. At this juncture, reference may be made to the scheme of the Act relating to motor accident claims as Page 44 of 114 C/FA/710/2007 JUDGMENT contained in Chapter XI of the Act. Chapter XI of the Act makes provision for insurance of motor vehicles against third party risks and is comprised of sections 145 to 164. As is apparent from the heading, Chapter XI makes provision for insurance of the vehicles against third party risks, that is to say, its provisions ensure that third parties who suffer on account of the user of a motor vehicle would be entitled to get damages for the injuries suffered and their liability to get the damages will not be dependent on the financial condition of the driver of the vehicle whose user led to the causing of the injuries. The provisions of the Act have, therefore, to be construed in such a manner as to ensure the object of the enactment.
19. Section 145 of the Act is the definition section of Chapter XI. Clause (a) thereof defines 'authorised insurer'. Clause (b) which may have some relevance in the present case defines 'certificate of insurance' to mean a certificate issued by an authorised insurer in pursuance of sub-section (3) of section 147 and includes a cover note complying with such requirements as may be prescribed, and where more than one certificate has been issued in connection with a policy, or where a copy of a certificate has been issued, all those certificates or that copy, as the case may be. Clause (d) defines 'policy of insurance' to include certificate of insurance and clause (g) defines 'third party' to include the Government.
20. Sub-section (1) of section 146 of the Act prohibits the use of a motor vehicle in a public place by any person unless there exists a policy of insurance in relation to the use of the vehicle by that particular person and the policy of insurance complies with the requirements of Chapter XI. The Page 45 of 114 C/FA/710/2007 JUDGMENT policy must, therefore, provide insurance against any liability to a third person incurred by that person when using that vehicle. The policy should, therefore, be with respect to that particular vehicle. The proviso to section 146 of the Act mandates that there shall be an additional policy of insurance under the Public Liability Insurance Act, 1991 in case of a vehicle carrying, or meant to carry, dangerous or hazardous goods. The explanation to section 146 of the Act provides for a deeming fiction whereby a person driving a motor vehicle merely as a paid employee is deemed not to have contravened the provisions of the said sub-section even if there is no policy in force in relation to the use of the said vehicle, unless he knows or has reason to believe that there is no such policy in force. Sub-section (2) of section 146 exempts vehicles owned by the Government and the Central Government from the provisions of sub-section (1) when such use is unconnected with any commercial purpose. Sub-section (3) provides for the contingencies in which the Government may exempt vehicles owned by the authorities enumerated thereunder from the provisions of sub-section (1).
21. As is clear from its heading, section 147 of the Act specifies the requirements of the policy and limits of liability. Sub-section (1) thereof lays down the criteria that the policy of insurance must satisfy in order to comply with the requirements of that Chapter. Such requirements are contained in clause (a) and (b) thereof. Clause (a) provides that the insurance policy must be issued by a person who is an authorised insurer. Clause (b) which is relevant for the present purpose mandates that to the extent specified under sub- section (2), such insurance policy should insure the person or Page 46 of 114 C/FA/710/2007 JUDGMENT classes of persons specified therein against the liabilities enumerated thereunder. The first liability that the insurance policy is required to cover is provided under clause (i) and is a liability which may be incurred by the insured in respect of death or bodily injury to any person carried in the vehicle or damage to property of a third party caused or arising out of the use of the vehicle in a public place. The expression "any person" referred to therein includes owner of the goods or his authorised representatives carried in the vehicle. The second kind of liability provided under clause (ii) is against the death or bodily injury to any passenger of a public service vehicle caused or arising out of the use of the vehicle in a public place. Thus, clause (i) covers liability of any kind of vehicle in respect of death or bodily injury of any person including the owner of goods or his authorised representative, whereas, clause (ii) covers the liability in respect of passengers in a public service vehicle.
21.1 The proviso thereto clarifies as to which are the risks that are not required to be covered by the policy. Clause
(i) of the proviso lays down that the insurance policy shall not be required to cover liability in respect of the death, arising out of and in the course of his employment, of the employee of a person insured by the policy or in respect of the bodily injury sustained by such employee arising out of and in the course of his employment other than a liability arising under the Workmen's Compensation Act, 1923 in respect of the death and bodily injury to any employee - (a) engaged in driving the vehicle or (b) if it is a public service vehicle, engaged as conductor of the vehicle or in examining the tickets on the vehicle or (c) if it is a goods carriage, being carried in the Page 47 of 114 C/FA/710/2007 JUDGMENT vehicle. Clause (ii) says that the policy shall not be required to cover any contractual liability.
21.2 Thus, the liability under the insurance policy could be either a statutory liability as envisaged under section 147 of the Act or a contractual liability in addition to the statutory liability which extends the cover of the risk under the insurance policy beyond that contemplated under the statute. The explanation to sub-section (1) is not relevant for the present purpose.
21.3 Sub-section (2) of section 147 provides for the limits of liability under the insurance policy. Under clause (a) the liability in a case other than that provided under clause (b) is to the extent of the amount of liability incurred, and under clause (b) in respect of damage to any property of a third party, the liability is limited to rupees six thousand.
21.4 Sub-section (3) of section 147 of the Act says that a policy shall have no effect for the purpose of that Chapter unless and until there is issued by the insurer in favour of the person by whom the policy is effected a certificate of insurance in the prescribed form and containing the prescribed particulars of any condition subject to which the policy is issued and of any other prescribed matters; and different forms, particulars and matters may be prescribed in different cases.
21.5 Sub-section (5) of section 147 which opens with a non-obstante clause lays down that notwithstanding anything contained in any law for the time being in force, an insurer Page 48 of 114 C/FA/710/2007 JUDGMENT issuing a policy of insurance under that 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. Thus, under the said sub-section, the insurance company is liable to indemnify the persons insured under the policy in respect of any liability which the policy purports to cover. In other words, the liability to indemnify is limited to the liability covered under the policy.
22. The crucial question that arises in the present case is whether the expression "any person" referred to in clause (i) of sub-section (1) of section 147 of the Act would include gratuitous passengers travelling in the offending vehicle, which may or may not be a goods vehicle. For the purpose of interpreting the said expression, it may be necessary to refer to various decisions of the Supreme Court in this regard.
22.1 In Pushpabai Purshottam Udeshi and Others v. M/s. Ranjit Ginning & Pressing Co. (P) Ltd. and another, (1977) 2 SCC 745, the Supreme Court has negatived the plea that the words "third party" are wide enough to cover all persons except the person and the insurer as the insurance cover is not available to the passengers is made clear by the proviso to sub-section which provides that the policy shall not be required: "(ii) except where the vehicle is a vehicle in which passengers are carried for hire or reward or by reason of or in pursuance of a contract of employment, to cover liability in respect of the death of or bodily injury to persons being carried in or upon or entering or mounting or alighting from the vehicle at the time of the occurrence of the event out of which Page 49 of 114 C/FA/710/2007 JUDGMENT the claim arises." Therefore, it is not required that a policy of insurance should cover risk to the passengers who are not carried for hire or reward. The above judgment was rendered in the context of the provisions of section 95 of the Motor Vehicles Act, 1939. Section 147 of the Act of 1988 is in pari materia with section 95 of the Act of 1939 and sub-clause (ii) of clause (b) of sub-section (1) of section 147 reads thus:
"(ii) against the death or bodily injury to any passenger of a public service vehicle caused by or arising out of the use of the vehicle in a public place."
Thus, insofar as passengers are concerned, the statutory insurance is mandatory only in respect of passengers of a public service vehicle and accordingly, the expression "third party" would not take within its fold gratuitous passengers travelling either in a goods vehicle or any other vehicle.
22.2 In National Insurance Co. Ltd. v. Baljit Kaur (supra), the question before the Supreme Court was whether an insurance policy in respect of a goods vehicle would also cover gratuitous passengers. Before the Supreme Court, it was contended that its earlier decisions in the case of Asha Rani and Konda Reddy were delivered prior to the amendment of section 147 by the Motor Vehicles (Amendment) Act, 1994. It was the submission of the respondent vehicle owner and driver that the insertion, by way of legislative amendment, or the words "including owner of the goods or his authorised representative carried in the vehicle" in section 147 would result in the inference that gratuitous passengers would as well be covered by the scope of the provision. It was urged that any other construction would render the words "any person" as Page 50 of 114 C/FA/710/2007 JUDGMENT completely redundant. The court held that the effect of 1994 amendment of section 147 is unambiguous. Where earlier, the words "any person" could not be held to include the owner of the goods or his authorised representative travelling in the goods vehicle, Parliament has now made it clear that such a construction is not possible. The scope of the rationale does not, however, extend to cover the class of cases where gratuitous passengers for whom no insurance policy was envisaged and for whom no insurance premium was paid, employ the goods vehicle as a medium of conveyance. The court further held that having regard to the definition of "goods carriage" vis-a-vis "public service vehicle", it is clear that whereas goods carriage carrying any passenger is not contemplated under the Act of 1988 as the same must be used solely for carrying the goods. The court held thus:
"17. By reason of the 1994 amendment what was added is, "including owner of the goods or his authorised representative carried in the vehicle". The liability of the owner of the vehicle to insure it compulsorily, thus, by reason of the aforementioned amendment included only the owner of the goods or his authorised representative carried in the vehicle besides the third parties. The intention of Parliament, therefore, could not have been that the words 'any person' occurring in section 147 would cover all persons who were travelling in a goods carriage in any capacity whatsoever. If such was the intention there was no necessity of Parliament to carry out an amendment inasmuch as the expression 'any person' contained in sub-clause (i) of clause (b) of sub-section (1) of section 147 would have included the owner of the goods or his authorised representative besides the passengers who are gratuitous or otherwise.
19. In Asha Rani, 2003 ACJ 1 (SC), it has been noticed that sub-clause (I) of clause (b) of sub-section (1) of section 147 of the Act of 1988 speaks of liability Page 51 of 114 C/FA/710/2007 JUDGMENT which may be incurred by the owner of a vehicle in respect of 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 vehicle in a public place.
Furthermore, an owner of a passenger-carrying vehicle must pay premium for covering the risk of the passengers travelling in the vehicle. The premium in view of the 1994 amendment would only cover a third party as also the owner of the goods or his authorised representative and not any passenger carried in a goods vehicle whether for hire or reward or otherwise.
20. It is therefore, manifest that in spite of the amendment of 1994, the effect of the provision contained in section 147 with respect to persons other than the owner of the goods or his authorised representative remains the same. Although the owner of the goods or his authorised representative would now be covered by the policy of insurance in respect of a goods vehicle, it was not the intention of the legislature to provide for the liability of the insurer with respect to passengers, especially gratuitous passengers, who were neither contemplated at the time the contract of insurance was entered into, nor any premium was paid to the extent of the benefit of insurance to such category of people."
22.3 In National Insurance Company Limited v. Geeta Bhat (supra), the Supreme Court held that the liability of an insurer to reimburse the insured, as an owner of the vehicle not only depends upon the terms and conditions laid down in the contract of insurance but also the provisions of the Motor Vehicles Act, 1988. The owner of the vehicle is statutorily obligated to obtain insurance for the vehicle to cover the third party risk. A distinction has to be borne in mind in regard to a claim made by the insured in respect of damage of his vehicle or filed by the owner or any passenger of the vehicle as contradistinguished from a claim made by a third party.
Page 52 of 114C/FA/710/2007 JUDGMENT 22.4 In National Insurance Company Limited v.
Prema Devi, (supra), the Supreme Court held thus:
"7. In New India Assurance Co. Ltd. v. Vedwati it was held as under:
"6. '4. This Court had occasion to deal with cases of passengers travelling in goods vehicles which met with accident resulting in death of such person or bodily injury. Such cases belong to three categories i.e. (1) those covered by the old Act; (2) those covered by the Act; and (3) those covered by amendment of the Act in 1994 by the Motor Vehicles (Amendment) Act, 1994 (hereinafter referred to as "the Amendment Act").
5. The present appeals belong to the second category.
6. In Satpal SIngh case this Court proceeded on the footing that provisions of Section 95(1) of the old Act are in pari materia with Section 147(1) of the Act as it stood prior to the amendment in 1994.
7. On a closer reading of the expressions "goods vehicle". "public service vehicle", "stage carrier"
and "transport vehicle" occurring in Sections 2(8), 2(25), 2(29) and 2(33) of the old Act with the corresponding provisions i.e. Sections 2(14), 2(35), 2(40) and 2(47) of the Act, it is clear that there are conceptual differences. The provisions read as follows:
Old Act:
"2.(8) 'goods vehicle' means any motor vehicle constructed or adapted for use for the carriage of goods, or any motor vehicle not so constructed or adapted when used for the carriage of goods solely or in addition to passengers;
* * * (25) 'public service vehicle' means any motor vehicle used or adapted to be used for the carriage of passengers for hire or reward, and includes a motorcab, contract carriage, and stage carriage;
* * *
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C/FA/710/2007 JUDGMENT
(29) 'stage carriage' means a motor vehicle carrying or adapted to carry more than six persons excluding the driver which carries passengers for hire or reward at separate fares paid by or for individual passengers, either for the whole journey or for stages of the journey;
* * * (33) 'transport vehicle' means a public service vehicle or a goods vehicle;"
The Act (New Act):
"2.(14) 'goods carriage' means any motor vehicle constructed or adapted for use solely for the carriage of goods, or any motor vehicle not so constructed or adapted when used for the carriage of goods;
* * * (35) 'public service vehicle' means any motor vehicle used or adapted to be used for the carriage of passengers for hire or reward, and includes a maXIcab, a motorcab, contract carriage, and stage carriage;
* * * (40) 'stage carriage' means a motor vehicle constructed or adapted to carry more than six passengers excluding the driver for hire or reward at separate fares paid by or for individual passengers, either for the whole journey or for stages of the journey;
* * * (47) 'transport vehicle' means a public service vehicle, a goods carriage, an educational institution bus or a private service vehicle;"
(emphasis in original)
8. "Liability" as defined in Section 145(c) of the Act reads as follows:
"145. (c) 'liability', wherever used in relation to the death of or bodily injury to any person, includes liability in respect thereof under Section 140;"
9. Third-party risks in the background of vehicles which are the subject-matter of insurance are dealt with in Chapter VIII of the old Act and Chapter XI of the Act. Proviso to Section 147 [of the Act] needs to be juxtaposed with Section 95 of the old Act. Proviso to Page 54 of 114 C/FA/710/2007 JUDGMENT Section 147 of the Act reads as follows:
"Provided that a policy shall not be required ----
(i) to cover liability in respect of the death, arising out of and in the course of his employment, of the employee of a person insured by the policy or in respect of bodily injury sustained by such an employee arising out of and in the course of his employment other than a liability arising under the Workmen's Compensation Act, 1923 (8 of 1923), in respect of the death of, or bodily injury to, any such employee-
(a) engaged in driving the vehicle, or
(b) if it is a public service vehicle engaged as a conductor of the vehicle or in examining tickets on the vehicle, or
(c) if it is a good carriage, being carried in the vehicle, or
(ii) to cover any contractual liability."
It is of significance that the proviso appended to Section 95 of the old Act contained Clause (ii) which does not find place in the new Act. The same reads as follows:-
"(ii) except where the vehicle is a vehicle in which passengers are carried for hire or reward or by reason of or in pursuance of a contract of employment, to cover liability in respect of the death of or bodily injury to persons being carried in or upon or entering or mounting or alighting from the vehicle at the time of the occurrence of the event out of which a claim arises."
The difference in the language of "goods vehicle" as appearing in the old Act and "goods carriage" in the Act is of significance. A bare reading of the provisions makes it clear that the legislative intent was to prohibit goods vehicle from carrying any passenger. This is clear from the expression "in addition to passengers"
as contained in the definition of "goods vehicle" in the old Act. The position becomes further clear because the expression used is "goods carriage" is solely for the carriage of "goods". Carrying of passengers in a goods carriage is not contemplated in the Act. There is no provision similar to Clause (ii) of the proviso appended Page 55 of 114 C/FA/710/2007 JUDGMENT to Section 95 of the old Act prescribing requirement of insurance policy. Even Section 147 of the Act mandates compulsory coverage against death of or bodily injury to any passenger of "public service vehicle". The proviso makes it further clear that compulsory coverage in respect of drivers and conductors of public service vehicle and employees carried in goods vehicle would be limited to liability under the Workmen's Compensation Act, 1923 (in short "the WC Act"). There is no reference to any passenger in "goods carriage".
10. The inevitable conclusion, therefore, is that provisions of the Act do not enjoin any statutory liability on the owner of a vehicle to get his vehicle insured for any passenger travelling in a goods carriage and the insurer would have no liability therefor."
22.5 In Oriental Insurance Company Limited v. Sudhakaran K.V. and others, (2008) 7 SCC 428, the Supreme Court held thus:
"13. In terms of Section 147 of the Act only in regard to reimbursement of the claim to a third party, a contract of insurance must be taken by the owners of the vehicle. It is imperative in nature. When, however, an owner of a vehicle intends to cover himself from other risks; it is permissible to enter into a contract of insurance in which event the insurer would be bound to reimburse the owner of the vehicle strictly in terms thereof.
14. The liability of the insurer to reimburse the owner in respect of a claim made by the third party, thus, is statutory whereas other claims are not.
15. The only question which, therefore, arises for our consideration is as to whether the pillion-rider on a scooter would be a third party within the meaning of Section 147 of the Act.
16. Indisputably, a distinction has to be made between a contract of insurance in regard to a third party and the owner or the driver of the vehicle.Page 56 of 114
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17. This Court in a catena of decisions has categorically held that a gratuitous passenger in a goods carriage would not be covered by a contract of insurance entered into by and between the insurer and the owner of the vehicle in terms of Section 147 of the Act.
18. A Division Bench of this Court in United India Insurance Co. Ltd. v. Tilak Singh extended the said principle to all other categories of vehicles also, stating as under:
"21. In our view, although the observations made in Asha Rani case were in connection with carrying passengers in a goods vehicle, the same would apply with equal force to gratuitous passengers in any other vehicle also. Thus, we must uphold the contention of the appellant Insurance Company that it owed no liability towards the injuries suffered by the deceased Rajinder Singh who was a pillion-rider, as the insurance policy was a statutory policy, and hence it did not cover the risk of death of or bodily injury to a gratuitous passenger."
19. The submission of Ms Bhat, learned counsel, however, is that this Court should not extend the said principle to the vehicles other than the goods carriage. As at present advised, we may not go into the said question in view of some recent decisions of this Court, viz. National Insurance Co. Ltd. v. Laxmi Narain Dhut, Oriental Insurance Co. Ltd. v. Meena Variyal and New India Assurance Co. Ltd. v. Vedwati.
20. The provisions of the Act and, in particular, Section 147 of the Act were enacted for the purpose of enforcing the principles of social justice. It, however, must be kept confined to a third-party risk. A contract of insurance which is not statutory in nature should be construed like any other contract. (emphasis supplied)
21. We have noticed the terms of the contract of insurance. It was entered into for the purpose of covering the third-party risk and not the risk of the owner or a pillion-rider. An exception in the contract of insurance has been made, i.e., by covering the risk of the driver of the vehicle. The deceased was, indisputably, not the driver of the vehicle.
Page 57 of 114C/FA/710/2007 JUDGMENT
22. The contract of insurance did not cover the owner of the vehicle, certainly not the pillion-rider. The deceased was travelling as a passenger, stricto sensu may not be as a gratuitous passenger as in a given case she may not be a member of the family, a friend or other relative. In the sense of the term which is used in common parlance, she might not be even a passenger. In view of the terms of the contract of insurance, however, she would not be covered thereby."
22.6 In United India Insurance Co. Ltd., Shimla v. Tilak Singh and Others, (2006) 4 SCC 404, the Supreme Court held thus:-
"14. Turning to the third contention of the appellant, the question as to whether a gratuitous passenger would be covered by a statutory insurance policy, has been the subject-matter of a number of decisions of this Court.
A. The Act of 1939
15. In Pushpabai Purshottam Udeshi v. Ranjit Ginning & Pressing Co. (P) Ltd. the insurance company had raised the contention that the scope of statutory insurance under Section 95(1)(a) read with 95(1)(b)(i) of the Motor Vehicles Act, 1939 does not cover the injury suffered by a passenger and since there was a limited liability under the insurance policy, the risk of the insurance company would be limited to the extent it was specifically covered. After referring to the English Road Traffic Act, 1960, and Halsbury's Laws of England (3rd Edn.) this Court came to the conclusion that Section 95 of the Act of 1939 required that the policy of insurance must be a policy insuring the insured against any liability incurred by him in respect of death or bodily injury to a third party and rejected the contention that the words "third party" were wide enough to cover all persons except the insured and the insurer. This Court held as under : (vide SCC p. 760, para 20):
"Therefore it is not required that a policy of insurance should cover risk to the passengers who are not carried for hire or reward. As under Section 95 the Page 58 of 114 C/FA/710/2007 JUDGMENT risk to a passenger in a vehicle who is not carried for hire or reward is not required to be insured, the plea of the counsel for the insurance company will have to be accepted and the insurance company held not liable under the requirements of the Motor Vehicles Act."
16. In Amrit Lal Sood v. Kaushalaya Devi Thapar it was held that in that particular case the terms of the policy were wide enough to cover a gratuitous passenger and, therefore, there was liability towards the gratuitous person.
17. In T.V. Jose (Dr.) v. Chacko P.M. Variava, J. had an occasion to survey the law with regard to the liability of insurance companies in respect of gratuitous passengers. After referring to a number of decisions of this Court the learned Judge observed (vide SCC p.757, para 19) "the law on this subject is clear, a third-party policy does not cover liability to gratuitous passengers who are not carried for hire or reward." The insurer company was held not liable to reimburse the appellant.
18. Thus, even under the Act of 1939 the established legal position was that unless there was a specific coverage of the risk pertaining to a gratuitous passenger in the policy, the insurer was not liable. We find that clause (ii) of the proviso to Section 95(1) has been eliminated while drafting Section 147 of the Act of 1988. Under sub-section (1)(b) under the Act of 1988, compulsory policy of insurance required under the statute must now provide against any liability which may be incurred by the owner of the vehicle "in respect of the death of or bodily injury to any person, including owner of the goods or his authorised representative carried in the vehicle or damage to any property of a third party caused by or arising out of the use of the vehicle in a public place". (Emphasis supplied) B. The Act of 1988
19. The argument that the risk pertaining to a third party would extend to a person other than the parties to the insurance contract was raised in New India Assurance Co. v. Satpal Singh where after contrasting the language Page 59 of 114 C/FA/710/2007 JUDGMENT of Section 95 (1) of the Act of 1939 with the provisions of Section 147 (1) of the Act of 1988 this Court held:
"11. The result is that under the new Act an insurance policy covering third-party risk is not required to exclude gratuitous passengers in a vehicle, no matter that the vehicle is of any type or class. Hence the decisions rendered under the old Act vis-a-vis gratuitous passengers are of no avail while considering the liability of the insurance company in respect of any accident which occurred or would occur after the new Act came into force."
20. The view expressed in Satpal Singh case however, has been specifically overruled in the subsequent judgment of a Bench of three judges in New India Assurance Co. Ltd. v. Asha Rani. In that case the discussion arose in connection with carrying passengers in a goods vehicle. This Court after referring to the terms of Section 147 of the Act of 1988, as contrasted with Section 95 of the Act of 1939, held that the judgment in Satpal Singh case had been incorrectly decided and that the insurer will not be liable to pay compensation. In the concurring judgment of Sinha, J. after contrasting the language used in the Act of 1939 with that of the Act of 1988, it has been observed:
"25. Section 147 of the Act of 1988, inter alia, prescribes compulsory coverage against the death of or bodily injury to any passenger of 'public service vehicle'. Proviso appended thereto categorically states that compulsory coverage in respect of drivers and conductors of public service vehicle and employees carried in a goods vehicle would be limited to the liability under the Workmen's Compensation Act. It does not speak of any passenger in a `goods carriage'.
27. Furthermore, sub-clauses (i) of clause (b) of sub-section (1) of Section 147 speaks of liability which may be incurred by the owner of a vehicle in respect of 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, whereas sub-clause (ii) thereof deals with liability which may be incurred by the owner of a vehicle Page 60 of 114 C/FA/710/2007 JUDGMENT against the death of or bodily injury to any passenger of a public service vehicle caused by or arising out of the use of the vehicle in a public place."
21. In our view, although the observations made in Asha Rani case were in connection with carrying passengers in a goods vehicle, the same would apply with equal force to gratuitous passengers in any other vehicle also. Thus, we must uphold the contention of the appellant Insurance Company that it owed no liability toward the injuries suffered by the deceased Rajinder Singh who was a pillion rider, as the insurance policy was a statutory policy, and hence it did not cover the risk of death of or bodily injury to a gratuitous passenger." (Emphasis supplied) 22.7 Thus, from a conspectus of the above decisions of the Supreme Court, it is manifest that it is the consistent view of the Supreme Court that a 'third party' policy or an 'Act only' policy does not cover gratuitous passengers in a goods vehicle or any other vehicle and that the expression 'any person' in sub-section (1) of section 147 or section 165 of the Act would not take within its fold gratuitous passengers in a goods vehicle or other vehicle. The contention that all parties except those who are signatories to the contract including gratuitous passengers would fall within the ambit of the expression "any person" as envisaged in sub-section (1) of section 147 of the Act, therefore, does not merit acceptance.
23. Motor Accident Claim Petitions before the Claims Tribunal that are covered by insurance policies can be broadly classified into three categories. The first category is where the insurance policy is an 'Act only' (liability only) policy and the victim is a third party and, therefore, falls within the ambit of sub-section (1) of section 147 of the Act, in other words, where the risk is a statutory one as envisaged under section 147 of Page 61 of 114 C/FA/710/2007 JUDGMENT the Act and is covered by the insurance policy; the second category is where the insurance policy is an 'Act only' policy and the victim is not a third party, in other words, the risk is not covered by the insurance policy; and the third category is where the insurance policy is a comprehensive or package policy etc. and covers risks wider than that mandated by the statute. In the first case, the liability being a statutory one, the insurance company would be liable to indemnify the insured except for breach of the conditions specified in sub-section (2) of section 149 of the Act. In the third category of cases, one would have to look at the insurance policy and ascertain as to whether the risk of the passenger is included. In the present cases, we are concerned with the second category of cases, viz. the insurance policy is an 'Act only' policy and the victims are gratuitous passengers in a goods vehicle or other vehicle.
24. From the principles enunciated in the above decisions, it is evident that insofar as gratuitous passengers travelling in a goods vehicle or other vehicle are concerned, the insurance company would not be liable to indemnify the insured, the same not being a liability covered either by the statute or under the insurance policy.
25. Generally, when the insurer is not liable either under the statute or under the contract to indemnify the insured in respect of a liability incurred by him, the question of the insurer having to pay the amount incurred towards such liability would not arise. However, a special provision has been made in the Motor Vehicles Act keeping in view the interest of third parties by virtue of sub-sections (4) and (5) of section 149 of the Act, which make provision for the insurer to pay the Page 62 of 114 C/FA/710/2007 JUDGMENT awarded amount to the claimants even when there is no liability and to recover the same from the insured.
26. In the above backdrop, the principal question that arises for consideration in all these cases is as to whether in a case where the insurance policy is an 'Act only' policy, namely a policy covering only the statutory risks, and the victim is a gratuitous passenger in a goods vehicle or other vehicle, whose risk is not covered under the policy, the provisions of sub-section (4) and (5) of section 149 of the Act would be attracted. It would, therefore, be necessary to advert to section 149 of the Act which reads thus:
149. Duty of insurers to satisfy judgments and awards against persons insured in respect of third party risks.--(1) 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 that sum by virtue of any enactment relating to interest on judgments.
(2) 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 or award is given the insurer had notice through the Court or, as the case may be, the Claims Page 63 of 114 C/FA/710/2007 JUDGMENT 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 of the policy, being one of the following conditions, namely:-
(i) a condition excluding the use of the vehicle--
(a) for hire or reward, where the vehicle is on the date of the contract of insurance a vehicle not covered by a permit to ply for hire or reward, or
(b) for organised racing and speed testing, or
(c) for a purpose not allowed by the permit under which the vehicle is used, where the vehicle is a transport vehicle, or
(d) without side-car being attached where the vehicle is a motor cycle; or
(ii) 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
(iii) 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.
(3) 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 (5 of 1908) conclusive as to any matter adjudicated upon by it, the insurer (being an insurer registered under the corresponding law of the Page 64 of 114 C/FA/710/2007 JUDGMENT 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 so 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).
(4) Where a certificate of insurance has been issued under sub-section (3) of section 147 to the person by whom 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 (2) shall, as respects such liabilities as are required to be covered by a policy under clause (b) of sub-section (1) of section 147, be of no effect:
Provided 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 sub-section shall be recoverable by the insurer from that person.
(5) 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.
(6) 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 Page 65 of 114 C/FA/710/2007 JUDGMENT 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.
(7) 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 (1) 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.
26.1 As noticed earlier, the central issue involved in the present case relates to the applicability of the provisions of section 149 of the Act. Section 149 of the Act can be broken up and analysed as under:
26.2 Sub-section (1) of section 149 − A certificate of insurance has to be issued in favour of a person under sub-section (3) of section 147;
− A judgment or award in respect of the liability under the certificate of insurance has to be obtained against any person insured under the policy;
− Such liability should be one which is required to be covered by a policy under clause (b) of sub-section (1) of section 147;
− Such liability should be covered by the terms of the policy or under the provisions of section 163-A;
− If the above requirements are satisfied, then notwithstanding the fact that the insurer may be entitled to avoid or cancel or may have avoided or cancelled the policy, the insurer shall pay to the person entitled to the benefit of the decree, any sum payable thereunder;
Page 66 of 114C/FA/710/2007 JUDGMENT − Such sum should not exceed the sum assured payable under the policy;
− The insurer shall pay such sum as if he was a judgment debtor in respect of such liability, together with any amount payable in respect of costs and any sum payable in respect of interest on that sum by virtue of any enactment relating to interest on judgments;
26.2.1 Thus, a pre-condition for invoking sub-section (1) of section 149 of the Act is the existence of a certificate of insurance as envisaged under sub-section (3) of section 147 in favour of a person. If such a certificate of insurance is in place and a judgment or award in respect of the liability under such certificate is obtained against any person insured under the policy, the insurer becomes liable to pay to the person entitled to the benefit of the decree any sum payable thereunder together with any amount payable in respect of costs and any sum payable in respect of interest (which sum shall not exceed the sum assured payable under the policy) as if he were the judgment debtor, notwithstanding the fact that he may be entitled to avoid or cancel or has avoided or cancelled such policy.
26.3. Sub-section (2) of section 149 − The insurer shall not be required to pay any sum under sub-section (1) in respect of any judgment or award unless;
− the insurer had notice through the court or the Tribunal, before the commencement of the proceedings in which the judgment or award is given. Thus, for the purpose of Page 67 of 114 C/FA/710/2007 JUDGMENT making the insurer liable it is mandatory that he should be given notice prior to the commencement of the proceedings;
− such notice issued by the court or the Tribunal as the case may be, shall be of bringing of proceedings, or in respect of such judgment and award so long as execution is stayed thereon pending an appeal;
− an insurer to whom notice of bringing of any proceedings is given shall be entitled to be made a party thereto; − the insurer shall be entitled to defend the action on the grounds enumerated in the said sub-section; − such grounds on which the insurer can defend the action are:
(i) there should be a breach of a specified condition of any one of the following conditions of the policy, viz., (i) a conditions which prohibits the use of the vehicle (a) for hire and reward, in case of a vehicle which on the date of the insurance policy is not covered by a permit to ply for hire or reward or (b) for organised risk and speed testing, or (c) in case where the vehicle is a transport vehicle, for a purpose not allowed by the permit under which the vehicle is used or (d) without side car being attached where the vehicle is a motorcycle.
(ii) the insurer is also entitled to defend the action for breach of the condition which prohibits 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.
(iii) the third ground on which the insurer can defend the Page 68 of 114 C/FA/710/2007 JUDGMENT action is for breach of condition excluding liability for injury caused or contributed by conditions of war, civil war, riot or civil commotion;
(b) the insurer can also defend the action on the ground that the policy is void on the ground that it was obtained by non-disclosure of a material fact or by representation of a fact which was false in some material particular.
26.3.1 Thus, the insurer is permitted to defend the action either for breach of specified conditions of the policy or on the ground that the policy is void. So the grounds of defence are two-fold, one on the basis of specified conditions as enumerated in the statute and the other is a restriction namely, that the policy shall be void if obtained by non- disclosure of a material fact or by representation of fact which was false in some material particular. Therefore, in relation to liability covered by a policy under clause (b) of sub-section (1) of section 147, the insurer can defend an action only on the grounds specified in sub-section (2) of section 149 of the Act.
26.4 Sub-section (3) of section 149 which relates to a judgment obtained from a court in a reciprocating country is not relevant for the present purpose.
26.5 Sub-section (4) of section 149 − In case where a certificate of insurance has been issued under sub-section (3) of section 147 to the person by whom a policy has been effected;
− if any part of the policy purports to restrict the
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insurance of the persons insured thereby by reference to any conditions other than those in clause (b) of sub- section (2), such conditions shall have no effect; − Such restrictive conditions will have no effect in respect of such liabilities that are required to be covered under clause (b) of sub-section (1) of section 147;
26.5.1 What sub-section (4), therefore, provides is that in respect of liabilities under clause (b) of sub-section (1) of section 147, no part of the policy can restrict the insurance of the persons insured thereby, other than by the conditions specified in clause (b) of sub-section (2), viz. a condition that the policy would be void if it was obtained by the non- disclosure of a material fact or a condition that the policy shall be void if it was obtained by a misrepresentation of fact which was false in some particular manner. In case the policy in any manner restricts the insurance of the persons insured thereby with reference to any other condition except those specified in clause (b) of sub-section (2) of section 149, the same shall have no effect to the extent of the liabilities as are required to be covered by the policy under clause (b) of sub-section (2) of section 147. Thus, sub-section (4) of section 149 of the Act protects the interests of third parties qua any restrictions other than those provided under clause (b) of sub-section (2) of section 149. Therefore, if the policy is in any manner restricted with reference to any condition other than clause (b) of sub- section (2) of section 147 of the Act, to the extent of the liability under clause (b) of sub-section (2) of section 147 of the Act, the same shall have no effect and the insurance company shall be liable to satisfy the award.
Page 70 of 114C/FA/710/2007 JUDGMENT 26.5.2 The proviso thereto safeguards the interests of the
insurer and lays down 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 that sub-section shall be recoverable by the insurer from that person. Thus, if the policy contains restrictions other than that provided in clause (b) of sub-section (2) of section 149 of the Act and by virtue of the provisions of the Act, if the insurance company pays any sum towards a liability of any person which liability is covered by the policy only under that sub-section, the insurer would be entitled to recover the same from that person.
26.6 Sub-section (5) of section 149:
- To attract sub-section (5) of section 149, the insurer should become liable to pay an amount under section 149,
- such amount should be payable in respect of a liability incurred by a person insured by a policy;
- the amount payable should exceed the amount for which the insurer would apart from the provisions of that section be liable under the policy in respect of that liability. In other words the liability of the insurer should exceed its liability under the policy, and such liability should be required to be discharged in view of the section 149;
- in such a case, the insurer would be liable to recover the excess from that person.
26.6.1 Thus, sub-section (5) of section 149 of the Act is again for the benefit of the insurer and says that if the insurer becomes liable to pay any amount under the said section Page 71 of 114 C/FA/710/2007 JUDGMENT towards the liability incurred by the person insured by a policy in excess of the amount which it would apart from the provisions of that section be liable under the policy in respect of that liability, the insurer shall be entitled to recover the excess from that person. It may be noted that sub-section (1) of section 147 of the Act mandates that in order to comply with the requirements of the said Chapter, a policy of insurance must insure the person or class of persons specified therein against any liability which may be incurred by him in respect of death or bodily injury to any person or to any property of a third party as well as against the death or bodily injury to any passenger of a public service vehicle caused by or arising out of the use of such vehicle in a public place. Therefore, once there is an insurance policy in existence as contemplated under sub-section (3) of section 147, the passengers in a public service vehicle would be entitled to recover the compensation awarded in their favour from the insurer as if it were the judgment debtor because the statute requires that the policy must cover the passengers. Now, if the permit of the vehicle restricts the number of passengers and the actual number of passengers is more, nevertheless all the passengers would be entitled to the benefit of the provisions of sub-section (5) of the Act namely, to be paid the sum under the decree by the insurer, who in turn would be entitled to recover the compensation paid to the claimants in excess of the liability under the policy from the insured.
26.6.2 Sub-section (5) of section 149 has been interpreted by the Supreme Court in the case of National Insurance Co.
Ltd. v. Anjana Shyam in the following terms:
Page 72 of 114C/FA/710/2007 JUDGMENT "Under sub-section (5), it is provided that if the amount which an insurer becomes liable to pay under this section 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 would be entitled to recover the excess from that person. Therefore, on the scheme of the Act, the insurance company, if it is not able to establish that there is a fundamental breach of a condition which would enable it to disclaim liability, it may have to pay the amount of compensation adjudicated by the Claims Tribunal subject of course to its right to recover from the insured, owner of the vehicle such excess as it is obliged to pay. Sub-section (6) of section 149 of the Act says that the expression 'material fact' and 'material particular' in the said section means the fact or the particular of such 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 expressions "liability covered by the terms of the policy" means the 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. Thus, even if the liability can be avoided or cancelled, or has been avoided or cancelled, the same would still be "a liability in terms of the policy" within the meaning of the said expression as envisaged in the said section. It may be noticed that the expression "liability in terms of the policy" appears only in sub-section (1) of section 149 of the Act. Thus, under sub-section (1), if a judgment or award passed against a person by whom a policy has been effected in respect of a liability in terms of the policy, the insurer would be liable as a judgment debtor despite the fact that he may be entitled to avoid or cancel or may have avoided or cancelled the policy and would be liable to satisfy the decree."
26.7 Sub-section (6) of section 149.
Sub-section (6) of section 149 defines the expressions "material fact", "material particular" and "liability covered by the terms of the policy"and says that the expression "material Page 73 of 114 C/FA/710/2007 JUDGMENT fact" and "material particular" in the said section means a fact or particular of such 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. The expression "liability covered by the terms of the policy" is defined to mean 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 same would still be a "liability in terms of the policy" within the meaning of the said expression as envisaged in the said section. It may be noted that the expression "liability in terms of the policy" appears only in sub-section (1) of section 149 of the Act. Thus, sub-section (6) of section 149 of the Act delineates the scope of the expression "liability in terms of the policy" as contained in sub-section (1) thereof. In other words when sub-section (1) of section 149 of the Act says that when a judgment or award is obtained against any person in whose favour a certificate of insurance has been issued in respect of a liability which 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" the insurer is liable to pay the person entitled to the benefit of the decree any sum not exceeding the sum assured payable thereunder, as if he were a judgment debtor in respect of such liability, what it means is notwithstanding that such policy may be one which the insurer is entitled to avoid or cancel or has avoided or cancelled, nonetheless it would still be a liability in terms of the policy and the insurer would be liable to pay the person who is entitled to the benefit of the decree the sum assured as if he were a judgment debtor.
Page 74 of 114C/FA/710/2007 JUDGMENT 26.8 Sub-section (7) of section 149. - 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 such
judgment or award as is referred to in sub-section (1) 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.
26.8.1 Thus what sub-section (7) of section 149 of the Act, insofar as the same is relevant for the present purpose, says is that if an insurer has been given a notice under sub-section (2) of section 149 of the Act, he can avoid his liability under the policy to any person entitled to the benefit of any such judgment or award as is referred to in sub-section (1) only in the manner provided for, in sub-section (2).
26.8.2 As held by the Supreme Court in the case of National Insurance Co. Ltd. v. Nicolletta Rohtagi (supra), the insurance company cannot avoid its liability to any person entitled to the benefit of any judgment or award referred to in sub-section (1) except in the manner provided in sub-section (2) of the Act. Therefore, if an insurer wants to avoid his liability to any person, who is entitled to the benefit of the judgment or award, he can do so only by raising the defence provided under sub-section (2) of section 149. If he is not successful in his defence, he will have to satisfy the decree. If he succeeds in his defence, even then, in view of the Page 75 of 114 C/FA/710/2007 JUDGMENT provisions of sub-section (1) of section 149, he would still remain a judgment debtor and would be liable to pay the amount to the claimant and recover the amount from the owner as envisaged in sub-section (4) and sub-section (5) of section 149.
27. In the above statutory backdrop reference may be made to the following decisions of the Supreme Court.
27.1 In United India Insurance Co. Ltd. v. K.M. Poonam (supra), the question involved was as to whether an insurance company can be held liable for payment of compensation to passengers travelling in a public transport in breach of the conditions of the permit granted to the owner of the vehicle for operating the same. The court observed that the law as regards the liability of the insurer towards third parties killed or injured in accidents involving different kinds of motor vehicles has been crystallized in the other judgments of the Supreme Court referred to therein. The third kind of party risk that the court was concerned with in the said case involved purported breach of the conditions contained in the insurance agreement executed by and between the insurer and the insured. The court further observed that in Baljit Kaur's case which was later also articulated in Anjana Shyam's case what emerges is that a policy of insurance in order to be valid, would have to comply with the requirements of Chapter XI of the Motor Vehicles Act, 1988 which deals with insurance of motor vehicles against third party risks. Section 146 of the Act stipulates that no person shall use, except as a passenger, or cause to allow any other person to use, a motor vehicle in a public place, unless there is a valid policy of insurance in Page 76 of 114 C/FA/710/2007 JUDGMENT relation to the use of the vehicle complying with the requirements of the said Chapter. Section 147 of the Act is an extension of the provisions of section 146 and sets out the requirements of policies and the limit of their liability. Section 147(1)(a) provides that the policy of insurance must be issued by a person who is an authorised insurer. Section 147(1)(b) provides that a policy of insurance must be a policy which insures the person or classes of persons specified in the policy to the extent specified in sub-section (2). Sub-section (2) of section 147 indicates that subject to the proviso to sub-section (1) which excludes the liability of the insurer in certain specific cases, a policy of insurance referred to therein must cover any liability incurred in respect of any accident, inter alia, for the amount of liability incurred. However, in order to fix the liability of the insurer, the provisions of section 147 have to be read with section 149 of the Act which deals with the duty of the insurer to satisfy judgments and awards against persons insured in respect of third party risks. The court held that the liability of the insurer was confined to the number of persons covered by the insurance policy and not beyond the same. In the facts of the said case it was held that since the insurance policy of the owner of the vehicle covered six occupants of the vehicle in question, including the driver, the liability of the insurer would be confined to six persons only, notwithstanding the large number of persons carried in the vehicle. The court observed that such excess number of persons would have to be treated as third parties, but since no premium had been paid in the policy for them, the insurer could not be liable to make payment of the compensation amount as far as they are concerned. However, the liability of the insurance company to make payment even in respect of persons not covered by the Page 77 of 114 C/FA/710/2007 JUDGMENT insurance policy continues under the provisions of sub-section (1) of section 149 of the Act as it would be entitled to recover the same if it could prove that one of the conditions of the policy had been breached by the owner of the vehicle. The court held that any of the persons travelling in the vehicle in excess of the permitted number of six passengers, though entitled to be compensated by the owner of the vehicle, would still be entitled to receive the compensation amount from the insurer who could then recover it from the insured owner of the vehicle.
27.2 In New India Assurance Co. Ltd. v. Kamla and others, 2001 ACJ 843, the Supreme Court held thus:
"21. A reading of the proviso to sub-section (4) as well as the language employed in sub-section (5) would indicate that they are intended to safeguard the interest of an insurer who otherwise has no liability to pay any amount to the insured but for the provisions contained in Chapter XI of the Act. This means, the insurer 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.
22. To repeat, the effect of the above provisions is this: when a valid insurance policy has been issued in respect of a vehicle as evidenced by a certificate of insurance the burden is on the insurer to pay to third parties, whether or not there has been any breach or violation of the policy conditions. But the amount so paid by the insurer to third parties can be allowed to be recovered from the insured if as per the policy conditions the insurer had no liability to pay such sum to the insured.Page 78 of 114
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25. 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 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 Claims Tribunal. In the present case, if the insurance company succeeds in establishing that there was breach of the policy condition, the Claims 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."
(Emphasis supplied)
28. It may be noted that the other decisions of the Supreme Court which have been cited by the learned advocates for the respective parties are in respect of cases where the insurance company has sought to avoid its liability to indemnify the persons insured under the insurance policy on the ground of breach of conditions of the policy or on the ground that the cheque issued for payment of premium has been dishonoured and the policy had been cancelled by the insurance company, all of which pertain to cases involving third parties, where there was a statutory policy in existence. None of the said decisions relates to gratuitous passengers.
29. Insofar as the gratuitous passengers travelling in a goods vehicle or other vehicles are concerned, when there is Page 79 of 114 C/FA/710/2007 JUDGMENT an 'Act only' policy, the liability of the insurance company would be limited to its statutory liability under the Act as provided under sub-sections (1) and (2) of section 147 of the Act viz. (i) against any liability which may be incurred by the insured in respect of the death or bodily injury to any person, including owner of the goods or his authorised representative carried in the vehicle or damage to any property of a third party caused or arising out of the use of the vehicle in a public place; and (ii) against the death of or bodily injury to any passenger of a public service vehicle caused by or arising out of the use of the vehicle in a public place. The limits of such liability would be to the extent specified in sub-section (2) of section 147. As discussed earlier, gratuitous passengers travelling in a goods or other vehicle are not covered by the expression "any person" as contemplated under sub-section (1) of section 147 of the Act nor are they third parties.
30. It may be noted that Chapter XI of the Act relates to "insurance of motor vehicles against third party risks". The provisions of Chapter XI are, therefore, required to be construed keeping the same in mind. Section 149 of the Act provides for the duty of insurers to satisfy judgments and awards against persons insured in respect of third party risks. Thus, the heading of the said section itself makes it clear that the section casts a duty upon the insurer to satisfy judgments or awards against the insured in favour of third parties. Sub- section (1) provides that where there is a certificate of insurance issued in favour of any person and a judgment or award is passed against any such person in respect of the liability that is required to be covered under clause (b) of sub-
Page 80 of 114C/FA/710/2007 JUDGMENT section (1) of section 147 of the Act (viz. a third party liability), by a deeming fiction the insurer becomes the judgment debtor and is liable to satisfy the decree to the extent of the sum assured payable, notwithstanding the fact that he may be entitled to avoid or cancel or has avoided or cancelled the policy. Clearly, therefore, section 149 of the Act would be attracted only in case of third parties or parties actually covered under the insurance policy, in case the policy is wider than an 'Act only' policy. However, where the policy is an 'Act only' policy and does not cover the risk of gratuitous passengers, section 149 of the Act cannot be invoked.
31. At this stage, reference maybe made to the decision of a Five-Judge bench of the Supreme Court in the case of New India Assurance Co. Ltd. v. C.M. Jaya and others, (2002) 2 SCC 278 wherein it has been held thus:
"10. On a careful reading and analysis of the decision in Amrit Lal Sood it is clear that the view taken by the Court is no different. In this decision also, the case of Jugal Kishore is referred to. It is held
(i) that the liability of the insurer depends on the terms of the contract between the insured and the insurer contained in the policy;
(ii) there is no prohibition for an insured from entering into a contract of insurance covering a risk wider than the minimum requirement of the statute whereby risk to the gratuitous passenger could also be covered; and
(iii) in such cases where the policy is not merely statutory policy, the terms of the policy have to be considered to determine the liability of the insurer.
Hence, the Court after noticing the relevant clauses in the policy, on facts found that under Section II(1)(a) of the Page 81 of 114 C/FA/710/2007 JUDGMENT policy, the insurer has agreed to indemnify the insured against all sums which the insured shall become legally liable to pay in respect of death of or bodily injury to "any person". The expression "any person" would undoubtedly include an occupant of the car who is gratuitously traveling in it. Further, referring to the case of Pushpabai Purshottam Udeshi it was observed that the said decision was based upon the relevant clause in the insurance policy in that case which restricted the legal liability of the insurer to the statutory requirement under Section 95 of the Act. As such, that decision had no bearing on Amrit Lal Sood case as the terms of the policy were wide enough to cover a gratuitous occupant of the vehicle. Thus, it is clear that the specific clause in the policy being wider, covering higher risk, made all the difference in Amrit Lal Sood case as to unlimited or higher liability. The Court decided that case in the light of the specific clause contained in the policy. The said decision cannot be read as laying down that even though the liability of the Insurance Company is limited to the statutory requirement, an unlimited or higher liability can be imposed on it. The liability could be statutory or contractual. A statutory liability cannot be more than what is required under the statute itself. However, there is nothing in Section 95 of the Act prohibiting the parties from contracting to create unlimited or higher liability to cover wider risk. In such an event, the insurer is bound by the terms of the contract as specified in the policy in regard to unlimited or higher liability as the case may be. In the absence of such a term or clause in the policy, pursuant to the contract of insurance, a limited statutory liability cannot be expanded to make it unlimited or higher. If it is so done, it amounts to re-writing the statute or the contract of insurance which is not permissible." (Emphasis supplied) The above decision would be squarely applicable to the facts of the present case where the insurance policy being an "Act only" policy is limited to the statutory liability. Such statutory liability, therefore, cannot be expanded to make it unlimited or higher than the statutory liability. Gratuitous passengers not being covered by the insurance policy, the insurance company Page 82 of 114 C/FA/710/2007 JUDGMENT cannot be fastened with a liability which is neither a statutory liability nor is covered by the policy.
32. Another contention raised on behalf of the claimants is that in view of the provisions of sub-section (2) of section 149 of the Act, it was not permissible for the insurance company to raise any defence other than those enumerated thereunder. It has been submitted that if the coverage clause is restricted under the policy and the insurance certificate is issued under section 147(1)(b), there is a restriction qua third parties otherwise not required to be statutorily covered. It has been submitted that non-coverage also amounts to a restriction not specified in clause (a). Referring to sub-section (4) of section 149 of the Act, it was submitted that the words "so much of the policy" means "so much of the entire policy"
i.e. coverage of policy. In view of the provisions of sub-section (4) of section 149, so much of the policy as purports to restrict the insurance of persons insured thereby by reference to any condition other than clause (b) of sub-section (2) shall be of no effect. It was submitted that, therefore, non-coverage of parties other than third parties would also amount to a restriction and, therefore, would be of no effect. In the opinion of this court, the said contention does not merit acceptance for the reason that sub-section (4) of section 149 relates to such liabilities as are required to be covered by a policy under clause (b) of sub-section (1) of section 147. Therefore, what is prohibited under sub-section (4) of section 149 of the Act is to restrict the insurance as respects such liabilities as are required to be covered by a policy under clause (b) of sub-
section (1) of section 147. When a liability does not fall under clause (b) of sub-section (1) of section 147 of the Act, non Page 83 of 114 C/FA/710/2007 JUDGMENT coverage of such a liability cannot by any stretch of imagination be said to be a restriction so as to be hit by sub- section (4) of section 149. Under clause (b) of sub-section (1) of section 147, the insurance company is required to insure the person or class of persons specified in the policy against any liability which may be incurred by him in respect of death or bodily injury to any person, including the owner of the goods or his authorised representative carried in the vehicle or damage to any property of a third party caused by or arising out of the use of the vehicle in a public place and against the death or bodily injury of any passenger of a public service vehicle caused by or arising out of the use of the vehicle in a public place. A gratuitous passenger travelling in a goods vehicle or other vehicle, would not fall within the scope and ambit of clause (b) of sub-section (1) of section 147 and, therefore, is not a liability as is required to be covered by a policy under clause (b) of sub-section (1) of section 147. Under the circumstances, non-coverage of persons not statutorily required to be covered by the provisions of the Act cannot in any manner be said to be a restriction, so as to fall within the ambit of sub-section (4) of section 149 of the Act.
32.2 While it is true that under sub-section (2) of section 149 of the Act, the insurance company is required to raise defences only as provided under sub-section (2) thereof, however, the same would relate to defences in respect of persons who are required to be statutorily covered under sub- section (1) of section 147 of the Act. When the policy does not cover a risk which is not required to be covered under the statute, sub-section (2) of section 149 of the Act would not come in the way of the insurance company in raising a defence Page 84 of 114 C/FA/710/2007 JUDGMENT in respect thereof. Sub-section (2) of section 149 of the Act would be applicable only in respect of the liabilities incurred under sub-section (1) of section 147 of the Act, in which case the defences that can be raised would be restricted to those provided under the said sub-section. However, when the liability is not covered by the policy and is not a statutory liability under sub-section (1) of section 147 of the Act, the provisions of sub-section (2) of section 149 of the Act would not be attracted, and it is permissible for the insurance company to raise a defence that the risk is not covered by the policy.
33. Having come to the conclusion that in case of gratuitous passengers travelling in a goods vehicle or other vehicle, which risk is not covered by the insurance policy, the provisions of section 149 of the Act would not be attracted, the next question that arises for consideration is as to whether in such cases, the insurance company can be directed to pay the awarded amount and thereafter recover the same from the owner
34. For this purpose, reference may be made to the decision of the Supreme Court in the case of New India Assurance Co. Ltd. v. Asha Rani (supra) wherein the question involved was whether the insurer is liable to pay compensation to the dependents of the deceased passenger, while the deceased was travelling in a goods vehicle and that vehicle met with an accident, on account of which the passenger died or suffered bodily injury. The Supreme Court held thus:
Page 85 of 114C/FA/710/2007 JUDGMENT "9. In Satpal's case (supra), the Court assumed that the provisions of Section 95(1) of Motor Vehicles Act, 1939 are identical with Section 147(1) of the Motor Vehicles Act, 1988, as it stood prior to its amendment. But a careful scrutiny of the provisions would make it clear that prior to the amendment of 1994 it was necessary for the insurer to insure against the owner of the goods or his authorised representative being carried in a goods vehicle. On an erroneous impression this Court came to the conclusion that the insurer would be liable to pay compensation in respect of the death or bodily injury caused to either the owner of the goods or his authorised representative when being carried in a goods vehicle the accident occurred. If the Motor Vehicles Amended Act of 1994 is examined, particularly Section 46 of Act 6 of 1991 by which expression 'injury to any person' in the original Act stood substituted by the expression 'injury to any person including owner of the goods or his authorised representative carried in the vehicle' the conclusion is irresistible that prior to the aforesaid Amendment Act of 1994, even if widest interpretation is given to the expression 'to any person' it will not cover either the owner of the goods or his authorised representative being carried in the vehicle. The objects and reasons of clause 46 also states that it seeks to amend Section 147 to include owner of the goods or his authorised representative carried in the vehicle for the purposes of liability under the Insurance Policy. It is no doubt true that sometimes the legislature amends the law by way of amplification of an inherent position which is there in the statute, but a plain meaning being given to the words used in the statute, as it stood prior to its amendment of 1994, and as it stands subsequent to its amendment in 1994 and bearing in mind the objects and reasons engrafted in the amended provisions referred to earlier, it is difficult for us to construe that the expression 'including owner of the goods or his authorised representative carried in the vehicle which was added to the pre-existed expression 'injury to any person' is either clarificatory or amplification of the pre-existing statute. On the other hand it clearly demonstrates that the legislature wanted to bring within the sweep of Section 147 and making it compulsory for the insurer to insure even in case of a goods vehicle, the owner of the goods or his authorised representative being carried in a goods vehicle when Page 86 of 114 C/FA/710/2007 JUDGMENT that vehicle met with an accident and the owner of the goods or his representative either dies or suffers bodily injury. The judgment of this Court in Satpal's case, therefore must be held to have not been correctly decided and the impugned judgment of the Claims Tribunal as well as that of the High Court accordingly are set aside and these appeals are allowed. It is held that the insurer will not be liable for paying compensation to the owner of goods or his authorised representative on being carried in a goods vehicle when that vehicle meets with an accident and the owner of goods or his representative dies or suffers any bodily injury.
23. The applicability of decision of this Court in Mallawwa (Smt.) and Ors. v. Oriental Insurance Company Ltd. and Ors. ((1999) 1 SCC 403) in this case must be considered keeping that aspect in view. Section 2(35) of Act of 1988 does not include passengers in goods carriage whereas Section 2(25) of Act of 1939 did as even passengers could be carried in a goods vehicle. The difference in the definitions of the "goods vehicle" in Act of 1939 and "goods carriage" in Act of 1988 is significant. By reason of the change in the definitions of the terminology, the Legislature intended that a goods vehicle could not carry any passenger, as the words "in addition to passengers" occurring in the definition of goods vehicle in Act of 1939 were omitted. Furthermore, it categorically states that 'goods carriage' would mean a motor vehicle constructed or adapted for use "solely for the carriage of goods". Carrying of passengers in a 'goods carriage', thus, is not contemplated under Act of 1988.
24. We have further noticed that Section 147 of Act of 1988 prescribing the requirements of an insurance policy does not contain a provision similar to clause (ii) of the proviso appended to Section 95 of Act of 1939. The decisions of this Court in Mallawwa's case (supra) must be held to have been rendered having regard to the aforementioned provisions.
25. Section 147 of Act of 1988, inter alia, prescribes compulsory coverage against the death of or bodily injury to any passenger of "public service vehicle". Proviso appended thereto categorically states that compulsory coverage in respect of drivers and Page 87 of 114 C/FA/710/2007 JUDGMENT conductors of public service vehicle and employees carried in a goods vehicle would be limited to the liability under the Workmen's Compensation Act. It does not speak of any passenger in a 'goods carriage'.
26. In view of the changes in the relevant provisions in Act of 1988 vis-a-vis Act of 1939, we are of the opinion that the meaning of the words "any person"
must also be attributed having regard to the context in which they have been used i.e. 'a third party'. Keeping in view the provisions of Act of 1988, we are of the opinion that as the provisions thereof do not enjoin any statutory liability on the owner of a vehicle to get his vehicle insured for any passenger travelling in a goods vehicle, the insurers would not be liable therefor.
27. Furthermore, sub-clauses (i) of clause (b) of sub- section (1) of Section 147 speaks of liability which may be incurred by the owner of a vehicle in respect of 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, whereas sub-clause
(ii) thereof deals with liability which may be incurred by the owner of a vehicle against the death of or bodily injury to any passenger of a public service vehicle caused by or arising out of the use of the vehicle in a public place.
28. An owner of a passenger carrying vehicle must pay premium for covering the risks of the passengers. If a liability other than the limited liability provided for under the Act is to be enhanced under an insurance policy, additional premium is required to be paid. But if the ratio of this Court's decision in New India Assurance Company v. Satpal Singh and Ors. (2000) 1 SCC 237 is taken to its logical conclusion, although for such passengers, the owner of a goods carriage need not take out an insurance policy, they would be deemed to have been covered under the policy wherefor even no premium is required to be paid."
35. In National Insurance Co. Ltd. v. Bommithi Subbhayyamma and others, 2005 ACJ 721, the deceased was travelling in a lorry as a gratuitous passenger. The Page 88 of 114 C/FA/710/2007 JUDGMENT Supreme Court referred to its earlier decisions in the case of Asha Rani, Baljit Kaur, Challa Bharathamma, etc. and set aside the judgment of the High Court and held that the insurance company was not liable for payment of any compensation for death of the gratuitous passengers travelling in a goods vehicle and made it clear that the claimants would be entitled to recover the amount of compensation granted in their favour from the owner of the vehicle.
36. In Oriental Insurance Co. Ltd. v. Meena Variyal (supra), the Supreme Court held thus:
"17. It is difficult to apply the ratio of this decision to a case not involving a third party. The whole protection provided by Chapter XI of the Act is against third-party risk. Therefore, in a case where a person is not a third party within the meaning of the Act, the insurance company cannot be made automatically liable merely by resorting to the Swaran Singh ratio. This appears to be the position. This position was expounded recently by this Court in National Insurance Co. Ltd. v. Laxmi Narain Dhut. This Court after referring to Swaran Singh and discussing the law summed up the position thus:
"38. In view of the above analysis the following situations emerge:
1. The decision in Swaran Singh case has no application to cases other than third- party risks.
2. Where originally the licence was a fake one, renewal cannot cure the inherent fatality.
3. In case of third-party risks the insurer has to indemnify the amount and if so advised, to recover the same from the insured.
4. The concept of purposive interpretation has no application to cases relatable to Section 149 of the Act.
The High Courts/Commission shall now consider the matter afresh in the light of the position in law as delineated above."
We are in respectful agreement with the above view.
Page 89 of 114C/FA/710/2007 JUDGMENT
18. In New India Assurance Co. Ltd. v. Asha Rani this Court had occasion to consider the scope of the expression "any person" occurring in Section 147 of the Act. This Court held:
".. that the meaning of the words 'any person' must also be attributed having regard to the context in which they have been used i.e. ' a third party'. Keeping in view the provisions of the Act of 1988, we are of the opinion that as the provisions thereof do not enjoin any statutory liability on the owner of a vehicle to get his vehicle insured for any passenger travelling in a goods vehicle, the insurers would not be liable therefor."
In other words, this Court clearly held that the apparently wide words "any person" are qualified by the setting in which they occur and that "any person" is to be understood as a third party.
19. In United India Insurance Co. Ltd. v. Tilak Singh this Court made a survey of the prior decisions and discountenanced an attempt to confine the ratio of Asha Rani. This Court stated that although the observations in Asha Rani were in connection with carrying passengers in a goods vehicle, the same would apply with equal force also to gratuitous passengers in any other vehicle. This Court also noticed that the decision to the contrary in New India Assurance Co. v. Satpal Singh was specifically overruled in Asha Rani case. In other words, it was re- emphasised that a policy in terms of Section 147 of the Act is not intended to cover persons other than third parties."
37. In New India Assurance Co. Ltd. v. Vedwati (supra), it was held thus:
"13. The difference in the language of 'goods vehicle' as appearing in the old Act and 'goods carriage' in the Act is of significance. A bare reading of the provisions makes it clear that the legislative intent was to prohibit goods vehicle from carrying any passenger. This is clear from the expression 'in addition to passengers' as contained in definition of 'good vehicle' in the old Act. The position becomes further clear because the Page 90 of 114 C/FA/710/2007 JUDGMENT expression used is "good carriage" is solely for the carriage of goods. Carrying of passengers in a goods carriage is not contemplated in the Act. There is no provision similar to clause (ii) of the proviso appended to Section 95 of the old Act prescribing requirement of insurance policy. Even Section 147 of the Act mandates compulsory coverage against death of or bodily injury to any passenger of 'public service vehicle'. The proviso makes it further clear that compulsory coverage in respect of drivers and conductors of public service vehicle and employees carried in goods vehicle would be limited to liability under Workmen's Compensation Act, 1923 (in short 'the WC Act'). There is no reference to any passenger in 'goods carriage'.
14. The inevitable conclusion, therefore, is that provisions of the Act do not enjoin any statutory liability on the owner of a vehicle to get his vehicle insured for any passenger travelling in a goods carriage and the insurer would have no liability therefor." (Emphasis supplied)
38. In Deddappa v. Branch Manager, National Insurance Co. Ltd. (supra), the Supreme Court held thus:
"24. We are not oblivious of the distinction between the statutory liability of the Insurance Company vis-a-vis a third party in the context of Sections 147 and 149 of the Act and its liabilities in other cases. But the same liabilities arising under a contract of insurance would have to be met if the contract is valid. If the contract of insurance has been cancelled and all concerned have been intimated thereabout, we are of the opinion, the insurance company would not be liable to satisfy the claim.
25. A beneficial legislation as is well known should not be construed in such a manner so as to bring within its ambit a benefit which was not contemplated by the legislature to be given to the party. In Regional Director, Employees' State Insurance Corporation, Trichur v. Ramanuja Match Industries 1495 (1) SCC 218 [AIR 1985 SC 278], this Court held:Page 91 of 114
C/FA/710/2007 JUDGMENT "10. ...We do not doubt that beneficial legislations should have liberal construction with a view to implementing the legislative intent but where such beneficial legislation has a scheme of its own there is no warrant for the Court to travel beyond the scheme and extend the scope of the statute on the pretext of extending the statutory benefit to those who are not covered by the scheme."
We, therefore, agree with the opinion of the High Court.
26. However, as the appellant hails from the lowest strata of society, we are of the opinion that in a case of this nature, we should, in exercise of our extra-ordinary jurisdiction under Article 142 of the Constitution of India, direct the Respondent No.1 to pay the amount of claim to the appellants herein and recover the same from the owner of the vehicle viz., Respondent No.2, particularly in view of the fact that no appeal was preferred by him. We direct accordingly." (Emphasis supplied)
39. In Branch Manager, United India Insurance Co. Ltd. v. Nagammal and others (supra), the question before the Full Bench of the Madras High Court on a reference, was whether the insurer can be directed to pay compensation to the claimant in a case where the deceased and/or the injured was travelling as a gratuitous passenger in a goods vehicle and recover the same thereafter from the owner of such goods vehicle. The court held thus:
31. Thus from an analysis of the statutory provisions as explained by the Apex Court in various decisions rendered from time to time, the following picture emerges:
(i) The insurance policy is required to cover the liability envisaged under section 147, but wider risk can always be undertaken.
(ii) Section 149 envisages the defences which are
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open to the insurance company. Where the insurance company is not successful in its defence, obviously it is required to satisfy the decree and the award. Where it is successful in its defence, it may yet be required to pay the amount to the claimant and thereafter recover the same from the owner under such circumstance envisaged and enumerated in section 149(4) and section 149(5).
(iii) Under section 147 the insurance company is not statutorily required to cover the liability in respect of a passenger in a goods vehicle unless such passenger is the owner or agent of the owner of the goods accompanying such goods in the concerned goods vehicle.
(iv) Since there is no statutory requirement to cover the liability in respect of a passenger in a goods vehicle, the principle of 'pay and recover', as statutorily recognised in section 149(4) and section 149(5), is not applicable ipso facto to such cases and, therefore, ordinarily the court is not expected to issue such a direction to the insurance company to pay to the claimant and thereafter recover from the owner.
(v) Where, by relying upon the decision of the Apex Court in Satpal Singh's case, 2000 ACJ 1 (SC), either expressly or even by implication, there has been a direction by the trial court to the insurance company to pay, the appellate court is obviously required to consider as to whether such direction should be set aside in its entirety and the liability should be fastened only on the driver and the owner or whether the insurance company should be directed to comply with the direction regarding payment to the claimant and recover thereafter from the owner.
(vi) No such direction can be issued by any trial court to the insurance company to pay and recover relating to liability in respect of a passenger travelling in a goods vehicle after the decision in Baljit Kaur's case, 2004 ACJ 428 (SC), merely because the date of accident was before such decision. The date of accident is immaterial. Since the law has been specifically clarified, no trial court is expected to decide contrary to such decision.
(vii) Where, however, the matter has already been decided by the trial court before the decision in Baljit Kaur's case, 2004 ACJ 428 (SC), it would be in the discretion of the Page 93 of 114 C/FA/710/2007 JUDGMENT appellate court, depending upon the facts and circumstances of the case, whether the doctrine of 'pay and recover' should be applied or as to whether the claimant would be left to recover the amount from the person liable, I.e., the driver or the owner, as the case may be.
40. In National Insurance Company Ltd. v. Savitri Devi and others, 2012 (4) Scale 111, the Supreme Court held thus:
"8. The learned Single Judge of the High Court, under misconception, directed the Appellant-Insurance Company to make the payment to the claimants and then recover the amount from the estate of the owner by filing an execution petition, without taking recourse to a separate proceeding. The amount of compensation was also enhanced to Rs.1,64,500/- from Rs.70,000/- (in each case) by the High Court in the appeals preferred by the claimants. It is against this consolidated Judgment, the Appellant-Insurance Company is before us.
9. After having gone through the award of the Claims Tribunal and the Judgment and Order passed by the learned Single Judge of the High Court, we are not able to understand as to how it has been found that the Appellant-Insurance Company can still be held liable to pay the amount of compensation as there has been a categorical finding by both the Courts recording that the vehicle in question was insured only as "Goods carrying Vehicle". The custom of carrying barat in the village on the said truck will not be sufficient to hold the Appellant-
Insurance Company liable to pay the amount of compensation. Admittedly, Appellant-Insurance Company would not know unless the accident takes place as to for what purpose the vehicle in question was being used. The terms and conditions of the Insurance Policy are very clear and categorical and it creates a specific bar on carrying of any passengers, except the employees other than the driver, not exceeding six (6) in number, who should also come under the purview of Workman's Compensation Act.
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10. The specific case of the claimants was that the barat was being taken in the said open truck on 12.11.1996 when the accident had taken place. Thus, according to us, it clearly violates the terms and conditions of the policy."
41. In National Insurance Co. Ltd. v. Swaran Singh (supra), the Supreme Court observed thus:
"67. A beneficent statute, as is well known, must receive a liberal interpretation. Xxxxxx"
68. The liability of the insurer is a statutory one. The liability of the insurer to satisfy the decree passed in favour of a third party is also statutory"
xxxxxxx
77. Proviso appended to sub-section (4) of section 149 is referable only to sub-section (2) of section 149 of the Act. It is an independent provision and must be read in the context of section 96(4) of the Motor Vehicles Act, 1939. Furthermore, it is one thing to say that the insurer will be entitled to avoid its liability owing to breach of terms of a contract of insurance but it is another thing to say that the vehicle is not insured at all. If the submission of the learned counsel for the petitioner is accepted, the same would render the proviso to sub- section (4) as well as sub-section (5) of section 149 of the Act otiose, nor any effective meaning can be attributed to the liability clause of the insurance company contained in sub-section (1). The decision in Kamla's case (supra) has to be read in the aforementioned context.
78. Sub-section (5) of section 149 which imposes a liability on the insurer must be given full effect. The insurance company may not be liable to satisfy the decree and, therefore, its liability may be zero but it does not mean that it did not have initial liability at all. Thus, if the insurance company is made liable to pay any amount, it can recover the entire amount paid to the third party on behalf of the assured. If this interpretation is not given to the beneficent provisions of the Act Page 95 of 114 C/FA/710/2007 JUDGMENT having regard to its purport, the court fails to see a situation where beneficent provisions can be given effect to. Sub-section (7) of section 149 of the Act to which the pointed attention of the court had been drawn by the learned counsel for the petitioner, which is in the negative language, may now be noticed. The said provision must be read with sub-section (1) thereof. The right to avoid liability in terms of sub-section (2) of section 149 is restricted, as has been discussed hereinbefore. It is one thing to say that the insurance companies are entitled to raise a defence but it is another thing to say that despite the fact that its defence has been accepted having regard to the facts and circumstances of the case, the Claims Tribunal has power to direct them to satisfy the decree at the first instance and then direct recovery of the same from the owner. These two matters stand apart and require contextual hearing."
The court, accordingly, concluded that the liability of the insurance company to satisfy the decree at the first instance and to recover the awarded amount from the owner or driver thereof has been holding the field for a long time. The doctrine of stare decisis persuaded the court not to deviate from the said principle. The court thereafter held as follows:
"102. We may, however, hasten to add that the Claims Tribunal and the Court must, however, exercise their jurisdiction to issue such a direction upon consideration of the facts and circumstances of each case and in the event such a direction has been issued despite arriving at a finding of fact to the effect that the insurer has been able to establish that the insured has committed a breach of contract of insurance as envisaged under sub- clause (ii) of clause (a) of sub-section (2) of Section 149 of the Act, the insurance company shall be entitled to realise the awarded amount from the owner or driver of the vehicle, as the case may be, in execution of the same award having regard to the provisions of Sections 165 and 168 of the Act. However, in the event, having regard to the limited scope of inquiry in the proceedings before the Claims Tribunal it had not been able to do so, the Page 96 of 114 C/FA/710/2007 JUDGMENT insurance company may initiate a separate action therefor against the owner or the driver of the vehicle or both, as the case may be. Those exceptional cases may arise when the evidence becomes available to or comes to the notice of the insurer at a subsequent stage or for one reason or the other, the insurer was not given opportunity to defend at all. Such a course of action may also be resorted when a fraud or collusion between the victim and the owner of the vehicle is detected or comes to the knowledge of the insurer at a later stage.
103. Although, as noticed hereinbefore, there are certain special leave petitions wherein the persons having the vehicles at the time when the accidents took place did not hold any licence at all, in the facts and circumstances of the case, we do not intend to set aside the said awards. Such awards may also be satisfied by the petitioners herein subject to their right to recover the same from the owners of the vehicles in the manner laid down therein. But this order may not be considered as a precedent.
104. Although in most of the cases, we have not issued notices in view of the fact that the question of law has to be determined; we have heard counsel for the parties at length at this stage.
SUMMARY OF FINDINGS:
105. The summary of our findings to the various issues as raised in these petitions are 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 provisions of the Act have to be so interpreted as to effectuate the said object.
(ii) 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.Page 97 of 114
C/FA/710/2007 JUDGMENT (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, have 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 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 disqualified to drive at the relevant time.
(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 wherefore would be on them.
(v) The court cannot lay down any criteria as to how said burden would be discharged, inasmuch as the same would depend upon the facts and circumstance 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 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 Claims Tribunals in interpreting the policy conditions would apply "the rule of main purpose" and the concept of "fundamental breach" to allow defences available to the insured 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.
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(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 Claims 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 insurer, the Claims Tribunal has necessarily the power and jurisdiction to decide disputes inter se between 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 Claims 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 Claims 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 Claims Tribunal. Such determination of claim by the Claims Tribunal will be enforceable and the money found due to the insurer from the insured will be recoverable on a certificate issued by the Claims Tribunal to the Collector in the 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 Claims Tribunal.
Page 99 of 114C/FA/710/2007 JUDGMENT (XI) The provisions contained in sub-section (4) with proviso thereunder and sub-section (5) which are intended to cover specified contingencies mentioned therein to enable the insurer to recover amount paid under the contract of insurance on behalf of the insured can be taken recourse of by the Claims Tribunal and be extended to claims and defences of 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.
106. For the reasons aforementioned, these petitions are dismissed but without any order as to costs."
42. On a plain reading of the principles propounded in the above referred decisions, the inevitable conclusion is that insofar as risks not covered by the insurance policy which are also not in the nature of risks that are required to be statutorily covered, no power has been conferred on the High Court or the Claims Tribunal to direct the insurer to pay the compensation to the claimants and then recover such amount from the owner/insured. The powers conferred under section 149(4) and (5) of the Act, are the only source of power insofar as the High Court and the Claims Tribunal are concerned, to direct the insurer to pay the compensation and then recover the same from the insured/owner of the vehicle. If the case does not fall within the ambit of the said provisions, in the absence of any statutory power being vested either in the High Court or in the Claims Tribunal, the question of issuing such directions would not arise.
43. While it is true that the Motor Vehicles Act is a beneficial legislation and beneficial legislations should have a liberal construction with a view to implementing the legislative Page 100 of 114 C/FA/710/2007 JUDGMENT intent, it is equally true that where such beneficial legislation has a scheme of its own, there is no warrant for the court to travel beyond the scheme and extend the scope of the statute on the pretext of extending the statutory benefit to those who are not covered by the scheme. (See Regional Director, Employees State Insurance Corporation, Trichur v. Ramanuja Match Industries, 1985 (1) SCC 218). A beneficial legislation should not be construed in such a manner so as to bring within its ambit a benefit which was not contemplated by the legislature to be given to the party. Insofar as gratuitous passengers in a goods vehicle or other vehicle, who are not covered by the insurance policy, are concerned, the legislature did not intend to give them the benefit of the provisions of Chapter XI of the Act. The ambit of the benefit of the provisions of the said Chapter extends to statutory liabilities and liabilities covered by the insurance policy. In case where a liability is neither statutory nor covered by the terms of the policy, such persons cannot be extended the benefits under Chapter XI. As noticed by the Supreme Court in Asha Rani (supra), section 2(35) of the Act of 1988 which defines "public service vehicle"
does not include passengers in a goods carriage whereas under section 2(25) of the Act of 1939 even passengers could be carried in a goods vehicle. The difference in the definitions of "goods vehicle" in the Act of 1939 and "goods carriage" in the Act of 1988 is significant. By reason of the change in the definitions of the terminology, the Legislature intended that a goods vehicle could not carry any passenger, as the words "in addition to passengers" occurring in the definition of goods vehicle in the Act of 1939 were omitted. Furthermore, clause (14) of section 2 of the Act which defines "goods carriage"
categorically states that "goods carriage" would mean a motor Page 101 of 114 C/FA/710/2007 JUDGMENT vehicle constructed or adapted for use "solely for the carriage of goods" or any motor vehicle not so constructed or adapted when used for the carriage of goods. Thus, carrying of passengers in a "goods carriage", is not contemplated under the Act of 1988.
44. Therefore, in case where there is no statutory liability to cover a particular risk and the policy of insurance also does not cover such risk, as in the case of gratuitous passengers in a goods carriage or other vehicle, there is no liability of the insurance company to indemnify the insured. This, in fact, would be a case where there is even no initial liability. When neither does the contract of insurance cover the risk nor is the risk covered by the statutory provisions, even if there is a certificate of insurance in existence, if the same does not cover the non-statutory risk, the provisions of sub-section (4) and (5) of section 149 would not be attracted, and the insurance company cannot be made liable to pay the compensation and recover the same from the insured. Insofar as parties other than third parties as contemplated under the provisions of Chapter XI and XII of the Act are concerned, the provisions of sub-section (4) and (5) of section 149 of the Act would not be attracted and as such, there would not be any liability on the part of the insurance company to first pay the compensation awarded and then recover from the insured.
45. On behalf of the claimants, reliance has been placed upon the decision of the Supreme Court in the case of Manager, National insurance Co. Ltd. v. Saju Paul (supra) wherein the question involved was as to whether having regard to the provisions of the Motor Vehicles Act, 1988, the insurance Page 102 of 114 C/FA/710/2007 JUDGMENT company is liable to pay compensation for the bodily injury caused to the claimant who was travelling in a goods vehicle as a spare driver though he was employed as a driver in another vehicle owned by the owner of the vehicle under the policy of insurance. The court held that what is contemplated by the proviso to section 147(1) of the Act is that the policy shall not be required to cover liability in respect of death or bodily injury sustained by an employee arising out of and in the course of his employment other than the liability arising under the Workmen's Compensation Act, 1923. In the facts of the said case, the claimant was admittedly not driving the vehicle nor was he engaged in driving the said vehicle. The court held that merely because he was travelling in a cabin would not make his case different from any other gratuitous passenger.
45.1 The other question involved in the said case was as to whether in the peculiar facts of the said case a direction could be issued to the insurance company to first satisfy the awarded amount in favour of the claimant and recover the same from the owner of the vehicle. The court referred to its earlier decisions in the case of Baljit Kaur, Challa Bharathamma, Kaushalaya Devi, etc. as well as to the fact that the matter had been referred to the larger bench in National Insurance Company v. Roshan Lal and Another and in National Insurance Company Ltd. v. Parvethneni and Another where the following two questions had been referred:
(1) 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 Page 103 of 114 C/FA/710/2007 JUDGMENT 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.
(2) 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 liability where there is none?
45.2 The Supreme Court observed that pendency of the above questions before the larger Bench does not mean that the course that was adopted in Baljit Kaur and Challa Bharathamma should not be followed, more so, in the peculiar fact situation of the case and accordingly, permitted the claimant to withdraw the amount deposited by the insurance company before the court and permitted the insurance company to recover the amount from the owner by following the procedure as laid down in the case of Challa Bharathamma.
46. In S. Iyyapan v. M/s. United India Insurance Company Ltd. and Another, 2013 (7) SCALE 637, the question involved was as to whether an insurance company can disown its liability on the ground that the driver of the vehicle although duly licensed to drive a light motor vehicle but there was no endorsement in the licence to drive light motor vehicle used as commercial vehicle. The said case clearly falls within the ambit of Chapter XI of the Act and, therefore, is not relevant insofar as the present case is concerned.
47. In Kusum Lata and Others v. Satbir and Page 104 of 114 C/FA/710/2007 JUDGMENT Others, 2011 (3) Scale 74, the High Court as well as the Claims Tribunal has reached a finding that the vehicle in question was not involved in the accident. On the said question, the Supreme Court held in favour of the claimants. It appears that there was also some dispute regarding the licence of the driver of the offending vehicle. The said decision turns on the facts of the said case and, therefore, does not come to the aid of the claimants.
48. In Jawahar Singh v. Bala Jain & Ors., 2011 (5) Scale 494, the Supreme Court held thus:
"11. 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 Accident Claims Tribunal quite rightly 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 Claims Tribunal and was correctly decided. The High Court rightly chose not to interfere with the same."
Thus, the said case also related to an accident involving a third party and, therefore, the same would not be relevant for the present purpose.
49. In Oriental Insurance Co. Ltd. v. Inderjit Kaur (supra), the insurance policy was issued on 30 th November, 1989 and the premium for the policy was paid by cheque. The Page 105 of 114 C/FA/710/2007 JUDGMENT insurer sent a letter stating that the cheque had been dishonoured to the insured on 23 rd January, 1990 claiming that as the cheque had not been encashed, the premium of the policy had not been received and, therefore, the insurance company was not at risk. The accident took place on 9 th April, 1990. The insurance company denied the claim asserting that under section 64-VB of the Insurance Act, 1938, no risk was assumed by the insurer unless the premium thereon had been received in advance. The court held that despite the bar created by section 64-VB of the Insurance Act, the appellant therein, an authorised insurer, issued a policy of insurance to cover the bus without receiving the premium therefor. By reason of the provisions of section 147(5) and 149(1) of the Motor Vehicles Act, the appellant therein became liable to indemnify third parties in respect of the liability which that policy covered and to satisfy awards of compensation in respect thereof notwithstanding its entitlement (upon which the court did not express any opinion) to avoid or cancel the policy for the reason that the cheque issued in payment of the premium thereon had not been honoured. The court observed that the policy of insurance that the appellant therein had issued was a representation upon which the authorities and the third parties were entitled to act. The appellant was not absolved of its obligations to third parties under the policy because it did not receive the premium. Its remedies in this behalf lay against the insured. Thus, the said decision also relates to a third party risk which was covered by the policy.
50. The decision of the Supreme Court in New India Assurance Co. Ltd. v. Rula (supra) also relates to subsequent cancellation of the insurance policy on the ground Page 106 of 114 C/FA/710/2007 JUDGMENT that the cheque through which premium was paid was dishonoured. The Supreme Court held that such subsequent cancellation would not affect the rights of a third party which had accrued on the issuance of the policy on the date on which the accident took place.
51. In National Insurance Co. Ltd. v. Baljit Kaur (supra), the question before the Supreme Court was as to whether an insurance policy in respect of a goods vehicle would also cover gratuitous passengers, in view of the legislative amendment in 1994 to section 147 of the Motor Vehicles Act, 1988. The court after referring to its decision in the case of Asha Rani (supra) held that in place of the insurer, the owner of the vehicle shall be liable to satisfy the decree. The court, however, clarified that the legal position shall have prospective effect. The court was of the opinion that the interest of justice would be subserved if the appellant therein was directed to satisfy the awarded amount in favour of the claimants if not already satisfied and recover the same from the owner of the vehicle. It was further observed that for the purpose of such recovery, it would not be necessary for the insurer to file a separate suit but it could initiate a proceeding before the executing court as if the dispute between the insurer and the owner was subject matter of determination before the Claims Tribunal and the issue was decided against the owner and in favour of the insurer.
51.1 The said decision was rendered in the case of gratuitous passengers and as observed hereinbefore, would not fall within the scope and ambit of sub-section (4) and (5) of the Act. Therefore, though there is no reference in the said Page 107 of 114 C/FA/710/2007 JUDGMENT decision to the power which has been exercised by the Supreme Court, it is apparent that the Supreme Court has exercised powers under Article 142 of the Constitution.
52. Thus, in the decisions on which reliance has been placed by the learned counsel for the claimants, majority of the decisions relate to cases wherein third parties were the claimants. In a few cases, the Supreme Court has issued directions to pay and recover even in cases where the victims were not third parties. For the reasons stated hereinabove, this court is of the view that in cases involving third parties, where the Supreme Court, after finding the insurance company not liable, has directed the insurance company to first pay the awarded amount and then recover the same from the insured/owner, such powers are relatable to sub-section (4) and (5) of the Act. Whereas in cases of gratuitous passengers travelling in a goods vehicle or other vehicle, where the Supreme Court after holding that the insurance company is not liable, has directed it to pay the awarded amount and then recover the same from the insured/owner, such powers can be correlated only with Article 142 of the Constitution of India. At this stage it may be apposite to refer to the decision of the Supreme Court in the case of Indian Bank v. ABS Marine Products (P) Ltd. (supra), wherein the Supreme Court has observed that many a time, after declaring the law, in the operative part of the judgment, the court gives some directions which may either relax the application of law or exempt the case on hand from the rigour of the law in view of the peculiar facts or in view of the uncertainty of law till then, to do complete justice. While doing so, normally it is not stated that such direction/order is in exercise of power under Article 142. It Page 108 of 114 C/FA/710/2007 JUDGMENT is not uncommon to find that courts have followed not the law declared, but the exemption/relaxation made while moulding the relief in exercise of power under Article 142. When the High Courts repeatedly follow a direction issued under Article 142, by treating it as the law declared by the Supreme Court, incongruously, the exemption/relaxation granted under Article 142 becomes the law, though at variance with the law declared by the Supreme Court. The courts should, therefore, be careful to ascertain and follow the ratio decidendi and not the relief given on the special facts, exercising power under Article 142.
53. At this juncture, reference may be made to the decision of this court in the case of United India Insurance Co. Ltd. v. Lilaben (supra) wherein a co-ordinate bench of this court after referring to the decisions of the Supreme Court in the case of National Insurance Company Ltd. v. Savitri Devi, United India Insurance Co. Ltd. v. Jyotibala Ghanshyam Joshi, 2012 (2) GLR 1681, National Insurance Co. Ltd. v. Baljit Kaur, Deddappa v. National Insurance Co. Ltd., S. Iyyapan v. M/s. United India Insurance Company Ltd., Manager, National Insurance Co. Ltd. v. Saju P. Paul, National Insurance Co. Ltd. v. Challa Bharathamma (supra) and Oriental Insurance Co. Ltd. v. Sudhakaran K.V., AIR 2008 SC 2729, has held that in the case before it, the victim not being a third party, the insurance company has no liability at all as pointed out in the case of Oriental Insurance Co. Ltd. v. Sudhakaran K.V. (supra). The court referred to the observations made by the Supreme Court in the case of Manager, National Insurance Co. Ltd v. Saju P. Paul (supra) and was of the view that the said observations make it clear that the direction to pay the amount first and then to recover such amount can only be given in exercise of Page 109 of 114 C/FA/710/2007 JUDGMENT power conferred under Article 142 of the Constitution and the Supreme Court in the peculiar facts of the said case, exercised such power notwithstanding the pendency of reference to the larger bench. The court was of the view that there is no scope of passing such a direction either at the instance of the Claims Tribunal or of this court in the appeal under section 173 of the Act and held that the Claims Tribunal had erred in law in passing a direction upon the insurance company to pay the amount and then recover such amount notwithstanding its finding that the insurance company had no liability to pay the amount as the victims were not third parties within the meaning of the law.
53.1 A perusal of the said decision reveals that in the said case, the court was dealing with a case where the victim had died while travelling in a goods vehicle. The court observed that as no other vehicle was involved and the victims were travelling in a goods vehicle and the insurance company was liable for the third party risk, there was no scope of bringing the victim within the meaning of "third party" and, therefore, the Claims Tribunal had erred in directing the insurance company to pay the amount and then recover from the owner.
53.2 Thus, the above referred decision had been rendered in the context of gratuitous passengers travelling in a goods vehicle and hence, the provisions of sub-section (4) and (5) of section 149 would not be attracted. Therefore, non- consideration of the said provisions while rendering the said judgment would not render the said judgment per incuriam, having regard to the fact that this court has also found that in Page 110 of 114 C/FA/710/2007 JUDGMENT a case where the risk is not covered by the insurance policy and is also not a statutory risk as in the case of gratuitous passengers in a goods vehicle or other vehicle, the provisions of sub-section (4) and (5) would not be attracted and this court or the Claims Tribunal would have no power to direct the insurance company to first pay the compensation and then recover the same from the owner. The Supreme Court in the cases where such direction had been issued was exercising powers under Article 142 of the Constitution of India. In these circumstances, this court is in full agreement with the view expressed by a co-ordinate bench of this court in the case of United India Insurance Co. Ltd. v. Lilaben (supra) and does not find any reason to take a different view so as to refer the matter to a larger bench.
54. The Bombay High Court, in the case of New India Assurance Company Ltd. v. Sindhu (supra) was dealing with a case of gratuitous passengers in a goods carrying vehicle wherein the Claims Tribunal had issued a direction to the insurer to satisfy the award and then recover the said amount from the original tortfeasor, that is, the owner of the vehicle. On behalf of the insurance company it was contended that such directions issued by the Supreme Court were in exercise of powers under Article 142 of the Constitution. The court held that the consistent view is that such directions were issued by the Supreme Court on consideration of the relevant provisions of the Motor Vehicles Act and not in exercise of powers under Article 142 of the Constitution. That the view taken by the said court in the case of United India Insurance Co. Ltd. v. Sindhubai Kondiram Darwante, 2010 (4) Bom CR 325, that there is a power vesting in the Claims Tribunal Page 111 of 114 C/FA/710/2007 JUDGMENT and the High Court depending upon the facts and circumstances of each case to direct the insurer to pay compensation amount and thereafter to recover the same from the insured, holds the field. In United India Insurance Co. Ltd. v. N. Appireddy (supra), the Andhra Pradesh High Court followed the decision of the Supreme Court in the case of Baljit Kaur (supra) and directed the insurance company to first satisfy the award and then recover from the owner of the vehicle by initiating a proceeding before the executing court without filing a separate suit for the said purpose. This court for the reasons discussed hereinabove respectfully does not agree with the view taken by the Andhra Pradesh High Court as well as by the Bombay High Court in the above referred decisions. In Oriental Insurance Co. Ltd. v. Chandra Devi (supra) the Allahabad High Court was dealing with a case relating to a third party and, hence, the said decision would not have any applicability insofar as the present case is concerned.
55. In the light of the above discussion, this court is of the view that the Claims Tribunal was not justified in holding the appellant - insurance companies to be jointly and severally liable to pay the compensation awarded to the claimants after coming to the conclusion that the insurance company is not liable to indemnify the owner, in view of the fact that the victims were gratuitous passengers in the offending vehicle. While it is true that the Claims Tribunal has in the body of the judgment permitted the insurance company to recover the amount paid towards compensation from the owner after treating the award as a decree in favour of the insurance company, in view of the fact that the passengers were gratuitous passengers in the offending vehicle, the provisions Page 112 of 114 C/FA/710/2007 JUDGMENT of sub-section (4) and (5) of section 149 of the Act would not be attracted and, therefore, the Claims Tribunal had no power to issue such directions to the insurance company to first pay and thereafter recover the amount from the owner.
56. For the foregoing reasons, the appeals succeed and are accordingly allowed to the following extent. The impugned awards passed by the Claims Tribunal in all the appeals shall stand modified to the extent that instead of the opponents being jointly and severally liable to pay the compensation awarded under the said award, it shall be only the driver and the owner of the vehicle who shall be so liable and the insurance company shall stand exonerated from such liability.
57. A perusal of the record reveals that in First Appeals No.710/2007 to 713/2007, the entire awarded amount has been deposited with the Claims Tribunal. However, no amount appears to have been disbursed to the claimants. The appellant - insurance company shall be entitled to refund of the entire amount deposited by it with the interest that may have accrued thereon. The Claims Tribunal is accordingly, directed to release the balance amount lying in the fixed deposit in favour of the insurance company within two months from the date of receipt of a copy of this order with all accrued interest. There shall be no order as to costs.
58. In First Appeal No.3852/2008, it appears that the insurance company had deposited the awarded amount before the Claims Tribunal and vide order dated 24 th September, 2008, this court had directed the Claims Tribunal to pay 30% thereof to the claimant - Mahendrabhai by Account Payee Cheque and Page 113 of 114 C/FA/710/2007 JUDGMENT had directed the rest of the amount to be invested in a fixed deposit in any nationalised bank in the name of the claimant initially for a period of three years with cumulative interest with periodical renewal till the appeal is finally decided by the court. Insofar as the amount which is lying with the Claims Tribunal is concerned, the appellant - insurance company shall be entitled to refund thereof together with the interest that may accrue thereon. The respondent No.1 - claimant is directed to return the amount received by him pursuant to the interim order passed by this court within three months from the date of receipt of a copy of this judgment as it is well-settled law that any interim order passed in an appeal will necessarily abide by the final result of the appeal and as and when the claimant so deposits the amount, the Claims Tribunal shall release it in favour of the insurance company. Meanwhile, the Claims Tribunal is directed to release the balance amount lying in the fixed deposit in favour of the insurance company within two months from the date of receipt of a copy of this order with all accrued interest. There shall be no order as to costs.
( Harsha Devani, J. ) hki Page 114 of 114