United India Insurance Company Ltd vs Bhikhubhai Amarsinhbhai Parmar & on 8 May, 2014

[Cites 33, Cited by 7]

Gujarat High Court

United India Insurance Company Ltd vs Bhikhubhai Amarsinhbhai Parmar & on 8 May, 2014

1. The appellant - United India Insurance company Ltd. in this appeal under section 173 of the Motor Vehicles Act, 1988 (hereinafter referred to as "the Act") has called in question the judgement and award dated 16th August, 2013 passed by the Motor Accident Claims Tribunal, Rajkot in M.A.C. Petition No.320 of 2009, whereby the Tribunal has awarded compensation of Rs.6,37,000/- with interest at the rate of 8% per annum from the date of filing of the claim petition till realization thereof to the respondents No.1/1 and 1/2 - claimants, and has held the appellant - Insurance company along with the owner of the offending vehicle being truck bearing No.GJ-3-Y-6871 to be jointly and severally liable to pay the same.

2. The facts giving rise to the present appeal are that the respondents No.1/1 and 1/2 filed a claim petition before the Tribunal stating that on 04.01.2009, the deceased Bhikhubhai Amarshibhai was walking on the road, near the Marketing Yard, when the driver of the truck bearing No.GJ-3-Y-6871 dashed against him, which resulted in his death. In connection with the death of the deceased, the respondents No.1/1 and 1/2 filed a claim petition seeking compensation of Rs.8,00,000/- (rupees eight lakhs) under different heads.

3. The Tribunal upon appreciation of the evidence on record, found that the accident had occurred on account of the negligence on the part of the driver of the vehicle and thereafter, assessed the monthly income of the deceased at Rs.3,000/- and the monthly prospective income at Rs.4,500/-.

The   Tribunal         deducted     one-third       towards   the    personal
expenses        of    the    deceased       and    computed    the   monthly


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dependency loss at Rs.3,000/- and the annual dependency loss at Rs.36,000/-. Having regard to the fact that the age of the deceased was 33 years, the Tribunal applied a multiplier of 17 and awarded total dependency loss of Rs.6,12,000/-. The Tribunal also awarded Rs.10,000/- towards loss to estate, Rs.10,000/- towards loss of consortium and Rs.5,000/- towards funeral expenses. In all, the Tribunal awarded compensation of Rs.6,37,000/- to the respondents No.1/1 and 1/2 - claimants.

4. On the question of liability, before the Tribunal, on behalf of the appellant - insurance company, it was contended that the driver of the offending vehicle did not have a valid driving licence to drive a transport vehicle and as such there was a breach of the conditions of the policy. It was the case of the appellant that the driver of the offending vehicle was holding a licence to drive a 'light motor vehicle' only and as such, he did not have a licence to drive a 'heavy motor vehicle' and was, therefore, was not qualified to drive the offending vehicle. The Tribunal placed reliance upon the decision of the Supreme Court in the case of S. Iyyapan v. United India Insurance Company Limited and another, (2013) 7 SCC 62, and held that on the question of driving licence, the insurance company has not been able to establish breach of the conditions of policy and that mere production of a certificate of licence of the driver is not sufficient to establish breach of the conditions of the policy. The Tribunal observed that the insurance policy was in existence at the time of the accident and held the insurance company liable to indemnify the insured. Being aggrieved, the insurance company is in appeal.

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C/FA/3289/2013 JUDGMENT

5. Mr. Maulik Shelat, learned advocate for the appellant submitted that the accident in question has occurred on 4th January, 2009 and the vehicle in question was a truck which was in the nature of a light motor vehicle. Referring to the extract of the driving licence of the driver of the offending vehicle, it was pointed out that such licence was for non- transport light motor vehicle and was valid from 28.05.2001 to 27.05.2021 and that there was no endorsement in the licence that the driver was authorized to drive a transport vehicle. It was submitted that the fact that the driver was not holding a valid licence has been proved by examining the Regional Transport Officer, at Exhibit-37. The attention of the court was drawn to the provisions of section 3 of the Act, to point out that the same bars a person from driving a transport vehicle other than a motor cab or motorcycle hired for his own use or rented under any scheme made under sub-section (2) of section 75 unless his driving licence specifically entitles him so to do. Reference was made to section 5 of the Act to point out that there is a bar against the owner or person in charge of a motor vehicle against causing or permitting any person who does not satisfy the provisions of section 3 or section 4 to drive the vehicle. Referring to section 10 of the Act, which makes provision for "Form and contents of licences to drive", it was pointed out that the classes of licences have been enumerated thereunder one of which is "(e) transport vehicle". Thus, a transport vehicle constitutes a separate class of vehicles under the Act. It was, further submitted that a person is entitled to drive a motor vehicle only of the class specified in the driving licence. The attention of the court was invited to section 14 of the Act, which bears the heading "Currency of licences to drive motor vehicles", to point out that under sub-section (1) Page 4 of 30 C/FA/3289/2013 JUDGMENT thereof, it is provided that a learner's licence issued under the Act shall, subject to the other provisions of the Act, be effective for a period of six months from the date of issue of the licence. Under clause (a) of sub-section (2) of section 14 of the Act, it is provided that a driving licence issued or renewed under the Act shall in the case of a licence to drive a transport vehicle, be effective for a period of three years, and in case of other licences, if the person obtaining the licence, either originally or on renewal thereof, has not attained the age of fifty years on the date of issue or, as the case may be, renewal thereof, be effective for a period of twenty years from the date of such issue or renewal. It was, accordingly, submitted that the very fact that the licence had been issued for a period of twenty years makes it apparent that the licence was for a vehicle other than a transport vehicle, inasmuch as, a licence to drive a transport vehicle would be effective only for a period of three years. It was submitted that the decision of the Supreme Court in the case of the case of S. Iyyapan v. United India Insurance Co. Ltd. (supra) on which reliance has been placed by the Tribunal was in respect of an accident which had taken place prior to the year 2001 and hence, the said decision would not be applicable to the facts of the present case where the accident had taken place on 4 th January, 2009, that is, after the amendment in the Motor Vehicle Rules.

5.1 The attention of the court was drawn to the provisions of rule 8 of the Central Motor Vehicles Rules, 1989 (hereinafter referred to as "the rules"), to point out that the same postulates that the minimum educational qualification in respect of an applicant for obtaining licence to drive a Page 5 of 30 C/FA/3289/2013 JUDGMENT transport vehicle shall be a pass in the eighth standard. Referring to Form 4 prescribed under rule 14(1) of the rules, which is a "Form of applicant for licence to drive a motor vehicle", it was pointed out that the person applying for a licence is required to describe the class of vehicle in respect of which he desires to obtain a licence and that 'transport vehicle' is a separate category enumerated thereunder. It was submitted that prior to the year 2001, the categories of vehicles provided in Form 4 were different. However, subsequently, the category of 'transport vehicle' has been introduced in the year 2001. Referring to the form of driving licence as provided under Form 6 prescribed under rule 16(1) of the rules, it was pointed out that a licence is issued in respect of any of the vehicles described thereunder and 'transport vehicle' is a specific category described therein. Therefore, if the driver holds a licence to drive a transport vehicle it would be specified in the licence itself.

5.2 Referring to the definition of "driving licence" under sub- section (10) of section 2 of the Act, it was pointed out that a driving licence means a licence issued by a competent authority under Chapter II authorizing the person specified therein to drive, otherwise than as a learner, a motor vehicle or a motor vehicle of any specified class or description. It was submitted that, therefore, the licence itself would specify the class or description of the motor vehicle for which the holder of the vehicle is duly licensed. It was contended that when the owner of a transport vehicle hands over the same to a driver, he is required to verify as to whether he has a valid licence to drive a transport vehicle. The person who drives a transport vehicle is required to get such endorsement made in his Page 6 of 30 C/FA/3289/2013 JUDGMENT licence. It was submitted that in the present case, since the driver of the offending vehicle which was a transport vehicle, did not have any endorsement in his licence that the same has been issued to drive a transport vehicle, both the driver and the owner committed a fundamental breach of the conditions of the policy.

5.3 Reference was made to the decision of the Supreme Court in the case of National Insurance Company Ltd. v. Annappa Irappa Nesaria alias Nesaragi and others, (2008) 3 SCC 464, wherein the court has considered the provisions relating to issuance of licence and has, in paragraph 20 of the decision, observed that "transport vehicle" has now been substituted for "medium goods vehicle" and "heavy goods vehicle". The light motor vehicle continued, at the relevant point of time to cover both "light passenger carriage vehicle" and "light goods carriage vehicle". A driver who had a valid licence to drive a light motor vehicle, therefore, was authorized to drive a light goods vehicle as well. The court observed that clause (e) which provides for "transport vehicle"

which came to be substituted by GSR 221(E) with effect from 28.03.2001 and that before the amendment in 2001, the entries "medium goods vehicle" and "heavy goods vehicle"

existed which have been substituted by "transport vehicle". In the facts of the said case, since the accident had taken place on 09.12.1999, the court observed that the amendments carried out in the rules having a prospective operation, the licence held by the driver of the vehicle in question cannot be said to be invalid in law.

5.4 Reliance was placed upon the decision of the Supreme Page 7 of 30 C/FA/3289/2013 JUDGMENT Court in the case of New India Assurance Company Limited v. Roshanben Rahemansha Fakir and another, (2008) 8 SCC 253, wherein the driver was a holder of a licence of a three-wheeler and the licence was not meant to drive transport vehicle. The description of the class of vehicle, viz. the offending vehicle was an auto-rickshaw delivery van. The vehicle was not being used for a private purpose, but was a commercial vehicle. A contention was raised before the Tribunal that the driver of the vehicle did not hold a legal, valid and effective driving licence and therefore, the insurance company was not liable to reimburse the claim of the claimants. The court observed that the licence issued in favour of the driver of the offending vehicle was valid from 13.05.2004 to 12.05.2024. Section 14 (2) (a) provides that a driving licence issued or renewed under the Act shall, in case of a licence to drive a transport vehicle, will be effective for a period of three years, whereas in the case of any other vehicle, it can be issued or renewed for a period of twenty years from the date of issuance or renewal. The fact that the licence was granted for a period of twenty years, thus, clearly shows that the driver of the vehicle was not granted a valid driving licence for driving a transport vehicle. The court, accordingly, held that the driver of the vehicle was not holding an effective licence and that possession of an effective licence is necessary in terms of section 10 of the Motor Vehicles Act. The court observed that in National Insurance company Ltd. v. Annappa Irappa Nesaria alias Nesaragi (supra), keeping in view the date on which the accident took place, the court had held that the driver was holding a valid licence. The court, accordingly, held that the insurance company was not liable as the driver of the vehicle was not holding an effective licence.

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5.5     Reliance was also placed upon the decision of the

Supreme Court in the case of National Insurance Co. Ltd. v. Kusum Rai and others, (2006) 4 SCC 250, wherein the court has held that the driver of the offending vehicle was holder of a licence to drive a light motor vehicle only. He did not possess any licence to drive a commercial vehicle. Evidently, therefore, there was a breach of condition of the contract of insurance and as such, it was open for the insurance company to raise the said defence. The court, however, in view of the fact that the victim was aged only 12 years and the claimants were from a poor background, referred to its earlier decision in the case of Oriental Insurance Co. Ltd. v. Nanjappan, (2004) 13 SCC 224, wherein the Supreme Court had directed the insurance company to satisfy the award and then recover the awarded amount from the insured, but at the same time, directed that the executing court shall pass appropriate orders in accordance with law as to the manner in which the insured, owner of the vehicle shall make payment to the insurer. It was held that in case there is any default, it shall be open to the executing court to direct realization by disposal of the securities to be furnished or from any other property or properties of the owner of the vehicle, the insured. Referring to the decision of the Supreme Court in the case of S. Iyyapan v. United India Insurance Co. Ltd., 2013 ACJ 1944, (supra), it was submitted that in the facts of the said case, the accident had taken place on 23rd May, 1998 and hence, the said decision would not be applicable to the facts of the present case.



5.6     Reliance was also placed upon the decision of the

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Supreme Court in the case of Oriental Insurance company Ltd. v. Angad Kol and others, (2009) 11 SCC 356, wherein the Supreme Court after referring to its earlier decisions in the case of National Insurance Co. Ltd. v. Annappa Irappa Nesaria, (2008) 3 SCC 464 and in the case of Ashok Gangadhar Maratha v. Oriental Insurance Co. Ltd., (1999) 6 SCC 620, held that in the facts of the said case, the driver did not hold a valid and effective driving licence for driving and the breach of the conditions of the insurance policy was, therefore, apparent on the face of the record. Strong reliance was placed upon the decision of the Supreme Court in the case of United India Insurance Co. Ltd. v. Sujata Arora and others, 2013 ACJ 2129, wherein the court held that driving without licence or with a fake licence and driving a vehicle negligently are two different aspects of the matter. Holding a valid driving licence is a requirement of law. If the vehicle was being driven by a person holding a valid licence, but rashly and negligently, it is a matter of evidence. The very fact which stood established that licence of the driver was a fake one, would completely exonerate the insurance company. The court observed that it was fortified in its view in the light of the two judgments of the Supreme Court in National Insurance Co. Ltd. v. Laxmi Narain Dhut, 2007 ACJ 721 (SC) and Jawahar Singh v. Bala Jain, 2011 ACJ 1677 (SC), wherein it has been held that in case it is found that the offending vehicle was driven by a driver who was either holding no licence or a fake licence, then it amounts to violation of terms and conditions of policy and in that circumstance, no liability can be fastened on the Insurance company.

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C/FA/3289/2013 JUDGMENT 5.7 Reliance was placed upon an unreported decision of the Rajasthan High Court in the case of Ram Kumar v. Mangal Chand and others rendered in S. B. Civil Miscellaneous Appeal No.842 of 2009 and other cognate matters on 28 th November, 2013, wherein the court had held that the provisions relating to licence make a clear distinction between 'light motor vehicle' and a 'transport vehicle'. The court held that in view of the law laid down by the Supreme Court in the cases of Roshanben Rahemansha Fakir (supra), Angad Kol (supra) and Prabhu Lal (supra), the person holding a driving licence to drive a 'light motor vehicle' is not entitled to drive a 'transport vehicle' even if its gross vehicle weight is less than 7500 kgs.

5.8 In conclusion, it was submitted that there was a fundamental breach of policy on the part of the owner of the offending vehicle in permitting a driver who was not having a valid licence to drive the offending vehicle in contravention of sections 3 and 5 of the Act. It was submitted that the Tribunal had erred in holding that the insurance company had failed to prove its defence despite the fact that the insurance company had duly proved by leading evidence, that the driver of the offending vehicle was not holding a valid licence, more so, in the absence of any rebuttal evidence having been led on behalf of the claimants. It was further submitted that it is not the case of the claimants or of the owner or of the driver of the offending vehicle that the accident had occurred on account of some mechanical fault or act of God. The Tribunal has categorically held that the accident had occurred on account of the rash and negligent driving on the part of the driver of the vehicle which is clearly co-relatable to the fact that he did not Page 11 of 30 C/FA/3289/2013 JUDGMENT hold a valid licence. It was urged that the Motor Vehicles Act casts a duty upon the driver to obtain a licence for the class of vehicle which he intends to drive. If he does not hold such licence, he lacks competence to drive such vehicle. In these circumstances, there being a breach of conditions of the policy, the insurance company is required to be exonerated.

5.9 Reference was made to the decision of the Supreme Court in the case of National Insurance Co. Ltd. v. Swaran Singh and others, (2004) 3 SCC 297, to submit that once the defences under sub-section (2) of section 149 of the Act are proved, the insurance company can avoid its liability under sub-section (7) of section 149 of the Act. It was submitted that in the facts of the present case, the insurance company has successfully proved that the deceased was travelling in a transport vehicle and the driver had no valid licence and hence, the insurance company is entitled to avoid liability under sub-section (7) of section 149 of the Act. It was, accordingly, urged that the appeal deserves to be allowed and the impugned award deserves to be quashed and set aside, to the extent the insurance company is held to be jointly and severally liable to satisfy the award.

6. On the other hand, Mr. Hemal Shah, learned advocate for the respondents No.1/1 and 1/2 - claimants submitted that the insurance company had not led any evidence to prove that there was a fundamental breach of the conditions of the policy. It was submitted that mere fact that the driver was not holding a valid licence, is not sufficient to exonerate the insurance company unless it is established by the insurance company that the accident had occurred on account of some Page 12 of 30 C/FA/3289/2013 JUDGMENT fundamental breach on the part of the owner and driver of the offending vehicle.

6.1 Reliance was placed upon the decision of the Supreme Court in the case of S. Iyyapan v. United India Insurance Co. Ltd. (supra), to submit that the same would also be applicable to the facts of the present case, inasmuch as, the court after referring to its earlier decisions in the case of National Insurance Co. Ltd. v. Kusum Rai (supra) and National Insurance Company Ltd. v. Annappa Irappa Nesaria alias Nesaragi (supra), has held that the insurer cannot disown its liability on the ground that although the driver was holding a licence to drive a light motor vehicle but before driving light motor vehicle used as commercial vehicle, no endorsement to drive commercial vehicle was obtained in the driving licence. It was submitted that the court had held that in any case, it is the statutory right of a third party to recover the amount of compensation so awarded from the insurer. It is for the insurer to proceed against the insured for recovery of the amount in the event there has been violation of any condition of the insurance policy. It was submitted that, therefore, in the event this court is inclined to hold that the driver of the vehicle was not holding a valid licence, even then, the insurance company should be held liable to satisfy the award and thereafter, recover the same from the insured. In support of his submissions, the learned counsel placed reliance upon an unreported decision of the Delhi High Court in the case of Future General India Insurance Co. Ltd. v. Mohd. Ibrahim and others, rendered in MAC. App.837/2011 on 9th October, 2012, wherein the court after referring to various provisions of the Motor Vehicles Act and the scheme of the Act, Page 13 of 30 C/FA/3289/2013 JUDGMENT has held that the driver who possessed a licence to drive light motor vehicle (NT) was not competent to drive the delivery van involved in the accident and accordingly, held that the insurer is thus entitled to avoid the liability. The court, after referring to various decisions of the Supreme Court in this regard, held that if the insurance company successfully proves a conscious breach of the terms of the policy, then it would be entitled to recovery rights against the owner or driver, as the case may be. However, the insurance company is under obligation to satisfy the award in the first instance and to recover the amount of compensation from the driver and the owner of the offending vehicle in execution of that very judgement without having recourse to independent civil proceedings. Reliance was also placed upon an unreported decision of a Division Bench of this court in the case of New India Assurance Co. Ltd. v. Mukhtyarbibi wd/o Sitabkha alias Kalubhai and others rendered in First Appeal No.1549 of 2012 and other cognate matters on 6th December, 2012, wherein the court held that the insurance company is required to establish that the breach or breaches were so fundamental as to have contributed to the cause of the accident. That a mere non-possession of the licence, by itself, would not allow the insurer to disown its liability arising out of negligent driving by the driver of the vehicle. Reliance was placed upon another unreported decision of a Division Bench of this court in the case of IFFCO-TOKIO General Insurance Co. Ltd. v. Lalitaben alias Leharkibai wd/o Jagdishbhai Ramubhai Patel and others rendered in First Appeal No.1657 of 2013 on 5 th February, 2014, wherein the court after referring to the decisions of the Supreme Court in the case of S. Iyyapan v. United India Insurance Co. Ltd. (supra) and National Insurance Company Ltd. v.

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C/FA/3289/2013 JUDGMENT Annappa Irappa Nesaria alias Nesaragi (supra), held thus:

"4.01. As such the aforesaid issue/controversy is now not res integra in view of the recent decision of the Hon'ble Supreme Court in the case of S. Iyyapan (supra) and considering all other earlier decisions on this point, it is held by the Supreme Court in the said decision that if the driver had driving licence to drive a light motor vehicle, he was driving a maxicab which is a light motor vehicle, but it was being used as a commercial vehicle, the Insurance Company cannot disown its liability on the ground that the driver although duly licensed to drive light motor vehicle but there was no endorsement in the licence to drive light motor vehicle used as a commercial vehicle. It is further observed and held by the Hon'ble Supreme Court that the Insurance Company may proceed against the insured for recovery of the amount if there is any violation of condition of insurance policy.

In view of the aforesaid recent binding decision of the Hon'ble Supreme Court, the contention raised on behalf of the appellant that as the driver of the offending vehicle in question was holding license to drive light motor vehicle (non-transport) and there was no endorsement in the license to drive light motor vehicle (transport) and therefore, appellant - Insurance Company is not liable to pay compensation, cannot be accepted."

6.2 It was, accordingly, urged that firstly, the insurance company has not established the breach of any condition of the insurance policy; and secondly, in the event the court is inclined to hold that breach of conditions has been established, even then in the light of the decision of the Supreme Court in the case of National Insurance Co. Ltd. v. Swaran Singh (supra) as well as the above referred decision of the Delhi High Court, the insurance company should be directed to satisfy the award first and to recover the same from the driver and/or owner of the offending vehicle.

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7. In rejoinder, Mr. Maulik Shelat, learned counsel for the appellant has submitted that if at all the court comes to the conclusion that the insurance company, despite breach of conditions having been established, is liable to first satisfy the award and then recover the same from the insured, the course of action adopted by the Supreme Court in the case of Oriental Insurance Co. Ltd. v. Nanjappan (supra) may be adopted.

8. In the backdrop of the aforesaid facts and contentions, two points arise for determination by this court. Firstly, as to whether in the light of the fact that the driver of the offending vehicle did not hold a licence for driving a transport vehicle, whether the insurance company is entitled to avoid its liability. Secondly, if the first question is answered in the affirmative, whether the insurance company is required to be totally exonerated from satisfying the award or is required to be directed to first satisfy the award and then, to recover the same from the owner and/or driver of the offending vehicle.

9. Dealing with the first point, a perusal of the extract of the driving licence of the driver of the offending vehicle issued by the Regional Transport Office, Rajkot (Exhibit-39) shows that the class of vehicle for which such licence has been issued is 'light motor vehicle' (Non-Transport)' and is valid from 28.05.2001 to 27.05.2021. The appellant - insurance company has examined one Pratapbhai Ravjibhai Dodiya, an officer from the Regional Transport Office, Rajkot, who has deposed that the driver of the offending vehicle was holding a licence to drive a light motor vehicle (N.T.), which was valid from Page 16 of 30 C/FA/3289/2013 JUDGMENT 28.05.2001 to 27.05.2021 and that on the basis of such licence, the driver was authorized to drive light motor vehicles other than transport vehicles. The witness has further deposed that the driver cannot drive a light carriage type of vehicle. If the driver wants to drive a transport vehicle, he has to make an application for issuance of such licence to the Regional Transport Office. In the present case, the driver of the offending vehicle has not taken any steps for getting any such endorsement made in his licence in respect of the transport vehicle. Thus, the appellant - insurance company has duly established by leading evidence in that regard that the driver of the offending vehicle was holding a licence to drive a light motor vehicle of the non-transport category. The fact that the driving licence was of non-transport category is also clear from the fact that the licence is valid for the period from 28.05.2001 to 27.05.2021, whereas in view of the provisions of sub-section (1) of section 14 of the Act, a licence to drive a transport vehicle would be effective only for a period of three years.

10. The next question that arises for consideration in the light of the decision of the Supreme Court in the case of National Insurance Co. Ltd. v. Swaran Singh and others (supra), is as to whether the accident has taken place without there being any fault on the part of the driver. In such an event, the question as to whether the driver was holding a valid licence or not, would become redundant.

11. As can be seen from the impugned judgement and award passed by the Tribunal, on the question of negligence, the Tribunal has clearly held that the accident had occurred on account of total negligence on the part of the driver of the Page 17 of 30 C/FA/3289/2013 JUDGMENT offending vehicle. Therefore, on the face of it, it is evident that the accident had occurred on account of the rash and negligent driving on the part of the driver who was not holding a valid driving licence to drive the class of vehicle which he was driving.

12. The Supreme Court in the case of National Insurance Company Ltd. v. Annappa Irappa Nesaria alias Nesaragi (supra) was dealing with a case where the accident occurred on 09.12.1999. The court held thus:

"11. The Motor Vehicles Act, 1988, which was enacted to consolidate and amend the law relating to motor vehicles, is a complete code.

12. Section 2 of the Act provides for interpretation of the terms contained herein. It employs the words "unless the context otherwise requires". Section 2(16) of the Act defines "heavy goods vehicle" to mean "any goods car- riage the gross vehicle weight of which, or a tractor or a road roller the unladen weight of either of which, exceeds 12,000 kilograms".

13. Section 2(21) defines "light motor vehicle" and Sec- tion 2(23) defines "medium goods vehicle" as under:

"2. (21) 'light motor vehicle' means a transport vehicle or omnibus the gross vehicle weight of either of which or a motor car or tractor or road roller the unladen weight of any of which, does not exceed 7500 kilograms;

* * * (23) 'medium goods vehicle' means any goods carriage other than a light motor vehicle or a heavy goods vehicle;"

14. Section 3 of the Act is in the following terms:

"3. Necessity for driving licence.--(1) No person shall drive a motor vehicle in any public place unless he holds an effective driving licence issued to him authorising him Page 18 of 30 C/FA/3289/2013 JUDGMENT to drive the vehicle; and no person shall so drive a trans- port vehicle other than a motor cab or motorcycle hired for his own use or rented under any scheme made under sub-section (2) of Section 75 unless his driving licence specifically entitles him so to do."

15. The Central Government has framed rules known as the Central Motor Vehicles Rules, 1989.

16. The word "form" has been defined in Rule 2(e) to mean a form appended to the Rules:

"Form 4 * * * I apply for a licence to enable me to drive vehicles of the following description:

                         *     *     *
     (d) Light motor vehicle
     (e) Medium goods vehicle
     **     *
     (g) Heavy goods vehicle
     **     *

(j) Motor vehicle of the following description."

After amendment the relevant portion of Form 4 reads as under:

"Form 4 * * * I apply for a licence to enable me to drive vehicles of the following description:

*      *    *
     (d) Light motor vehicle
     (e) Transport vehicle
     **     *

(j) Motor vehicle of the following description."

17. Rule 14 prescribes for filing of an application in Form 4, for a licence to drive a motor vehicle, categorising the same in nine types of vehicles.

18. Clause (e) provides for "transport vehicle" which has been substituted by GSR 221(E) with effect from 28-3- 2001. Before the amendment in 2001, the entries "medi-

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C/FA/3289/2013 JUDGMENT um goods vehicle" and "heavy goods vehicle" existed which have been substituted by "transport vehicle". As noticed hereinbefore, "light motor vehicles" also found place therein.

19. "Light motor vehicle" is defined in Section 2(21) and, therefore, in view of the provision, as then existed, it included a light transport vehicle. Form 6 provides for the manner in which the licence is to be granted, the rel- evant portion whereof reads as under:

"Authorisation to drive transport vehicle Number......... Date......

Authorised to drive transport vehicle with effect from.......

Badge number .........

Signature Designation of the licensing authority.

Name and designation of the authority who conducted the driving test."

20. From what has been noticed hereinbefore, it is evid- ent that "transport vehicle" has now been substituted for "medium goods vehicle" and "heavy goods vehicle". The light motor vehicle continued, at the relevant point of time to cover both "light passenger carriage vehicle" and "light goods carriage vehicle". A driver who had a valid li- cence to drive a light motor vehicle, therefore, was au- thorised to drive a light goods vehicle as well.

21. The amendments carried out in the Rules having a prospective operation, the licence held by the driver of the vehicle in question cannot be said to be invalid in law."

13. From the above decision, it is, therefore, clear that in cases arising after the amendments in the rules with effect from 28.03.2001, the driver of the offending vehicle was required to have a licence for the category of transport vehicle.

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14. In the case of S. Iyyapan v. United India Insurance Co. Ltd. (supra), on which reliance has been placed by the Tribunal for the purpose of holding that the insurance company is liable to satisfy the award, the court was dealing with a case where the accident took place on 23.05.1998. Apparently, therefore, the said case related to an incident which occurred prior to the date of the amendment in the rules. The court held that the insurer cannot disown its liability on the ground that although the driver was holding a licence to drive a light motor vehicle but before driving light motor vehicle used as commercial vehicle, no endorsement to drive commercial vehicle was obtained in the driving licence. As noticed earlier, the said decision was rendered in relation to an accident which had taken place prior to the amendment in the rules and hence, the same would not be applicable to the facts of the present case.

15. In New India Assurance Company Limited v.

Roshanben Rahemansha Fakir (supra), the Supreme Court referred to the provisions of section 10, section 2(47), section 14(2)(a) and other relevant provisions of the Act. In the facts of the said case, the accident had taken place sometime in the year 2005. The court observed that the licence which was granted in favour of the driver of the offending vehicle showed that the same was granted for a vehicle other than a transport vehicle. It was valid from 13.05.2004 to 12.05.2024. The court noted that section 14(2)(a) provides that a driving licence issued or renewed under the Act shall, in case of a licence to drive a transport vehicle, will be effective for a period of three years, whereas in the case of any other vehicle, it can be issued or renewed for a period of twenty years from the date Page 21 of 30 C/FA/3289/2013 JUDGMENT of issuance or renewal. The court observed that the fact that the licence was granted for a period of twenty years, thus, clearly shows that the driver of the vehicle was not granted a valid driving licence for driving a transport vehicle. The court, accordingly, held that it was evident that the driver of the vehicle was not holding an effective licence and that possession of an effective licence is necessary in terms of section 10 of the Motor Vehicles Act.

16. In the case of National Insurance Co. Ltd. v. Kusum Rai (supra), the Supreme Court observed that the vehicle which was used was a taxi and it was, therefore, a commercial vehicle. The driver of the said vehicle, thus, was required to hold an appropriate licence therefor. The driver of the said vehicle at the relevant time was holder of a licence to drive a light motor vehicle only. He did not possess any licence to drive a commercial vehicle. The court was of the view that evidently therefore, there was a breach of condition of the contract of insurance and it was permissible for the appellant - insurance company to raise the said defence. In United India Insurance Co. Ltd. v. Sujata Arora and others (supra), the Supreme Court held that driving without licence or with a fake licence and driving a vehicle negligently are two different aspects of the matter. Holding a valid driving licence is a requirement of law. If the vehicle was being driven by a person holding a valid licence, but rashly and negligently, it is a matter of evidence. The very fact which stood established that licence of the driver was a fake one, would completely exonerate the insurance company. The court observed that its above view was fortified by its earlier two decisions in National Insurance Co. Ltd. v. Laxmi Narain Dhut, 2007 Page 22 of 30 C/FA/3289/2013 JUDGMENT ACJ 721 (SC) and Jawahar Singh v. Bala Jain, 2011 ACJ 1677 (SC), wherein it had been held that in case it is found that the offending vehicle was driven by driver who was either holding no licence or a fake licence, then it amounts to violation of terms and conditions of policy and in that circumstance, no liability can be fastened on the Insurance company.

17. The Delhi High Court in Future General India Insurance Co. Ltd. v. Mohd. Ibrahim (supra) has referred to the relevant provisions of the Act and the rules in extenso and has held that a conjoint reading of sections 10, 11 and 14 of the Act will show that a person driving a vehicle must possess a licence to drive that class of vehicle which he intends to drive. If he proposes to drive any vehicle other than one for which he/she possesses an effective driving licence, he has to seek an addition to his/her driving licence. In other words, if a person wants to drive only a motor car whose unladen weight does not exceed 7500 kgs., he needs to have a licence to drive a light motor vehicle only. At the same time, if a person wants to drive a motor car for hire or reward, then that light motor vehicle will become a public service vehicle as well and a holder would not be competent to drive the motor car for hire and reward, that is, a maxicab or a motorcab or a taxi unless he possesses a licence to drive a transport vehicle for light motor vehicle. Similarly, every goods carriage is included in the definition of transport vehicle. Thus, the holder of a licence must possess a licence to drive a transport vehicle of the category of the goods vehicle whose gross vehicle weight does not exceed 7500 kgs., then he must possess a licence to drive a light motor vehicle of the category of transport vehicle. If he wants to drive a goods vehicle whose Page 23 of 30 C/FA/3289/2013 JUDGMENT gross vehicle weight is above 7500 kgs. or 12,000 kgs., then he must possess a licence to drive a medium motor vehicle of the category of transport vehicle and heavy motor vehicle of the category of transport vehicle, respectively. In the facts of the said case, since the respondent-driver possessed a licence to drive a light motor vehicle (non-transport), the court held that he was not competent to drive the delivery van. The court observed that it was not the case of the respondents therein that the accident was caused on account of some mechanical failure or any other similar cause, having no nexus with the driver not possessing requisite type of licence. Thus, the insurer is entitled to avoid the liability.

18. Examining the facts of the present case in the light of the principles enunciated in the decisions referred to hereinabove, the driver of the offending vehicle clearly did not hold a licence to drive a transport vehicle. The offending vehicle was a truck which was in the nature of a transport vehicle. On the question of negligence, the Tribunal has held that the accident had occurred on account of the total negligence on the part of the driver of the offending vehicle. It is not the case of the claimants or the owner and driver of the offending vehicle that the accident had occurred on account of some mechanical failure or any other similar cause, having no nexus with the driver not possessing requisite type of licence. Clearly therefore, there is a direct nexus between the occurrence of the accident and the driver not having the licence to drive a transport vehicle. Therefore, in the light of the provisions of sub-section (2) of section 149 of the Act read with sub-section (7) thereof, the appellant - insurance company is entitled to avoid its liability under the policy.

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C/FA/3289/2013 JUDGMENT

19. The next question that arises for consideration is that once having held that the appellant - insurance company is entitled to avoid its liability under the insurance policy, whether any direction to pay and recover is required to be issued, as urged by the learned advocate for the claimants.

20. In this regard, reference may be made to the decision of the Supreme Court in the case of National Insurance Co. Ltd. v. Swaran Singh (supra), wherein it was contended that sub-section (4) of section 149 of the Act deals with a situation where the insurer in the policy purports to restrict the insurance of the persons insured thereby by reference to any condition other than those in section 149(2)(b), and in that view of the matter, no liability is covered for driving of a vehicle without a licence or a fake licence. The court observed that the said submission ignores the plain and unequivocal expression used in section 149(2) as well as the proviso appended thereto. That with a view to construe a statute the scheme of the Act has to be taken into consideration. For the said purpose, the entire Act has to be read as a whole and then chapter by chapter, section by section and word by word. The court held that the 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 owning to breach of terms of a contract of insurance, but it is another thing to say that the vehicle is not insured at all. The court was of the view that if the submission of the learned counsel for the petitioner therein Page 25 of 30 C/FA/3289/2013 JUDGMENT 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 can any effective meaning be attributed to the liability clause of the insurance company contained in sub-section (1) of section 149. The court 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. The court expressed the view that if this interpretation was not given to the beneficent provisions of the Act having regard to its purport and object, it failed to see a situation where beneficent provisions can be given effect to. The court observed that sub-section (7) of section 149 of the Act must be read with sub-section (1) thereof. The court was of the view that the right to avoid liability in terms of sub-section (2) of section 149 is restricted. 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 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 reading.

21. This court in the case of United India Insurance Co. Ltd. v. Minor Mahesh Kanubhai and others rendered in First Appeal No.710 of 2007 and other cognate matters on 7 th April, 2014, has in a case where the victims were gratuitous Page 26 of 30 C/FA/3289/2013 JUDGMENT passengers travelling in goods and other vehicles has with reference to the provisions of sub-section (6) of section 149 which defines the expressions "material fact", "material particular" and "liability covered by the terms of the policy", held that 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. The court took note of the fact that the expression "liability in terms of the policy" appears only in sub- section (1) of section 149 of the Act and held that 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. The court observed that as held by Page 27 of 30 C/FA/3289/2013 JUDGMENT the Supreme Court in the case of National Insurance Co. Ltd. v. Nicolletta Rohatgi (2002 ACJ 1950), 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 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.

22. In the facts of the present case, it is not as if the risk of the third party is not covered under the policy of insurance. The case of appellant insurance company is that there is a breach of the conditions of the policy, inasmuch as, the driver of the offending vehicle did not have a valid driving licence to drive the vehicle of the class which he was driving, viz. a licence to drive an LCV-transport vehicle. Therefore, the present case would fall within the ambit of sub-section (4) of section 149 of the Act and hence, the insurance company though entitled to avoid its liability qua the insured, would be liable to first satisfy the award and thereafter, recover the same from the owner and driver of the offending vehicle.

23. At this juncture it may be apposite to refer to the decision of the Supreme Court in the case of Oriental Page 28 of 30 C/FA/3289/2013 JUDGMENT Insurance Co. Ltd. v. Nanjappan (supra), wherein it has been held thus :

"8. Therefore, while setting aside the judgement of the High Court, we direct in terms of what has been stated in Baljit Kaur case that the insurer shall pay the quantum of compensation fixed by the Tribunal, about which there was no dispute raised, to the respondent claimants within three months from today. For the purpose of recovering the same from the insured, the insurer shall not be required to file a suit. It may initiate a proceeding before the executing court concerned as if the dispute between the insurer and the owner was the subject-matter of determination before the Tribunal and the issue is decided against the owner and in favour of the insurer. Before release of the amount to the claimants, owner of the vehicle shall be issued a notice and he shall be required to furnish security for the entire amount which the insurer will pay to the claimants. The offending vehicle shall be attached as a part of the security. If necessity arises, the executing court shall take assistance of the Regional Transport Office concerned. The executing court shall pass appropriate orders in accordance with law as to the manner in which the insured, owner of the vehicle shall make payment to the insurer. In case there is any default, it shall be open to the executing court to direct realization by disposal of the securities to be furnished or from any other property or properties of the owner of the vehicle, the insured."

24. In the opinion of this court, while holding that the insurance company is liable to first satisfy the award and then recover the same from the owner, the course of action adopted in the above decision of the Supreme Court is required to be followed so as to secure the interests of the appellant insurance company. Accordingly, for the purpose of recovering the amount of compensation from the insured, the insurer shall not be required to file a suit. It may initiate a proceeding before the executing court concerned as if the dispute between the insurer and the owner was the subject-

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C/FA/3289/2013 JUDGMENT matter of determination before the Tribunal and the issue is decided against the owner and in favour of the insurer. Pursuant to the order dated 07.01.2014 made by this court in the Civil Application No.13535 of 2013 which had been filed seeking stay of the impugned award, the appellant insurance company has deposited the entire decreetal amount with the Tribunal. Before release of the amount to the claimants, owner of the vehicle shall be issued a notice and he shall be required to furnish security for the entire amount which the insurer will pay to the claimants. The offending vehicle shall be attached as a part of the security. If necessity arises, the executing court shall take assistance of the Regional Transport Office concerned. The executing court shall pass appropriate orders in accordance with law as to the manner in which the insured, owner of the vehicle shall make payment to the insurer. In case there is any default, it shall be open to the executing court to direct realization by disposal of the securities to be furnished or from any other property or properties of the owner of the vehicle, the insured.

25. The appeal, accordingly, stands allowed in the above terms.

The Registry shall forthwith send back the record and proceedings.

(HARSHA DEVANI, J.) parmar* Page 30 of 30

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Gujarat High Court