Jammu & Kashmir High Court
1. United India Insurance Co.Ltd. vs . Amina Begum And Others on 10 May, 2019
Equivalent citations: AIRONLINE 2019 J AND K 374
Author: Sanjeev Kumar
Bench: Sanjeev Kumar
HIGH COURT OF JAMMU AND KASHMIR
AT JAMMU
MA No. 491/2011, IA No. 01/2016
c/w
MA No. 446/2011, IA No. 150/2012.
Reserved on : 29.03.2019
Date of order : 10.05.2019
1. United India Insurance Co.Ltd. Vs. Amina Begum and others
2. Amina Begum and another Vs. Shahnawaz Ahmed Bhat and another
Coram:
Hon'ble Mr Justice Sanjeev Kumar, Judge
Appearance:
For the petitioner/appellant(s) : Mr. Ravinder Sharma, Advocate
For the respondent(s) : Mr.F.S.Butt, Advocate
i/ Whether to be reported in Yes/No
Press/Media?
ii/ Whether to be reported in Yes.
Digest/Journal?
1. The award passed by the Motor Accident Claims Tribunal, Jammu (hereinafter referred to as „Tribunal‟) dated 03.06.2016 in File No. 243/claim titled Amina Begum and others, is subject matter of challenge in these appeals.
MA No. 491/20112. This is an appeal filed by the United India Insurance Co.Ltd., in which it is inter alia, claimed that the Tribunal MA No. 491/2011&MA No. 446/2011 Page 1 of 33 has erroneously fastened the liability of satisfying the award on the Insurance Company. There is challenge to the impugned award on quantum as well.
MA No. 446/20113. This is an appeal filed by the claimants, who also feel dissatisfied with the amount of compensation awarded and are, therefore, seeking enhancement.
4. Before I proceed to appreciate the grounds of challenge taken in each one of the appeals, I deem it appropriate to take note of the factual context in which these two appeals have arisen.
5. On 31.05.2009, an accident involving vehicle bearing registration No. JK02G/5217 (offending vehicle for short) took place near Tapal Service Station, Kishtwar due to rash and negligent driving of its driver. The offending vehicle first hit Maruti Car bearing registration No.JK02L-7308 standing on the road side and then ran into the Service Station and caused grievous injuries to deceased Akhtar Hussain, who was working there. The injured later on succumbed to the injuries. The driver- respondent No.5 at the time of accident, was under the employment of respondent No.4, the owner of the offending vehicle. The offending vehicle was claimed to be insured with the appellant-insurance company (hereinafter referred to as "Insurer" for brevity). The MA No. 491/2011&MA No. 446/2011 Page 2 of 33 respondents 1 to 3 (hereinafter referred to as claimants for brevity) who are parents and brother of the deceased filed a claim petition before the Tribunal seeking a compensation of Rs.20,75,000/- from the driver, owner and the insurer. The petition was contested by the insurer only. The owner though filed his objections, but, chose not to contest the claim petition, as such, was proceeded exparte by the Tribunal. The claim petition of the claimants was resisted by the insurer, inter alia, on the ground that the driver of the offending vehicle did not possess a valid and effective driving licence at the relevant time of accident and therefore, violated the terms and conditions of the insurance policy. A specific objection was taken by the appellant-insurer that the offending vehicle was not insured with them as the cheque issued on behalf of the owner Mohd. Abbas for the premium amounting to Rs.9136/- was dishonoured and the policy of insurance issued in anticipation of encashment of cheque was cancelled, which fact, the appellant insurer claims, had been intimated to the owner Mohd Abbas in whose name the policy of insurance had been issued.
6. Be that as it may, in the light of pleadings of the parties, and the rival claims, the Tribunal framed the following issues:-
MA No. 491/2011&MA No. 446/2011 Page 3 of 33(i) Whether an accident occurred on 31.05.2009 near Tapal Service Station, Kishtwar by the rash and negligent driving of offending vehicle No.JK02G-5217 in the hands of erring driver in which deceased Akhtar Hussain sustained fatal injuries ? OPP.
(ii) If issue No.1 is proved in affirmative, whether the petitioners are entitled to the compensation, if so to what amount and from whom? OPP
(iii) Whether the driver of the offending vehicle at the time of accident was not holding valid and effective driving license and plied the vehicle in violation of terms and conditions of insurance policy? OPR-2.
(iv) Relief. OP Parties.
7. In order to prove the issues and discharge the burden, the claimants examined one Tariq Maqsood and Ashok Kumar besides examining one of the claimants, namely, Ghulam Mustafa, father of the deceased. The appellant-
insurance company examined only one witness, i.e., Karam Chand, Administrator of the Company in rebuttal. The Tribunal, as it reveals from the award, found the issue No.1 proved in favour of the claimants. The Tribunal concluded that the accident was the result of rash and MA No. 491/2011&MA No. 446/2011 Page 4 of 33 negligent driving of the offending vehicle by the driver in which Akhtar Hussain sustained grievous injuries to which he later succumbed. The issue No.3, the onus of which was on the insurer was held not proved for the reasons that despite opportunities provided the insurer could not produce any evidence and show that the driver was not having a valid and effective driving licence at the relevant time of the accident. After returning findings on issues 1 and 3, the Tribunal proceeded to decide the issues No. 2 and 4 and worked out a compensation of Rs.7,73,100/-. For calculating the compensation, the Tribunal has taken into consideration the age of mother of the deceased and found that the multiplier applicable was 14, but, taking note of the uncertainty of life, the same was slashed down to 12. The Tribunal took the established income of the deceased as Rs.8000/- per month and deducted 1/3rd towards personal expenses. This is how the compensation was computed by the Tribunal and impugned award passed.
8. From the careful reading of the impugned award, one thing that comes to fore is that despite insurance company having taken a specific objection with regard to the maintainability of the claim petition against it on the ground that the cheque representing premium of the insurance policy paid on behalf of the erstwhile owner of MA No. 491/2011&MA No. 446/2011 Page 5 of 33 the offending vehicle Mohd Abbas had been dishonoured and the policy of insurance had been cancelled w.e.f. 10.04.2009 as a consequence thereof. Interestingly, the Tribunal did not frame this vital issue. The reasons for omission are not forthcoming from the record. There is, however, discussion of the plea taken by the appellant insurer while appreciating the evidence for deciding the issues No. 2 and 4. The specific plea taken by the appellant-insurer in its objections filed before the Tribunal needs to be taken note of is reproduced hereunder:-
"7. That the insured Mr. Mohd Abbas son of Sh. Ghulam Sheikh has deposited the premium amounting to Rs.9137.00 by way of cheque. The answering respondents deposited the same in his Bank and the bank of the insured has returned the same with the memo at serial no.16 dishonoured the cheque for insufficient funds. On receiving this information the answering respondents has cancelled the insurance policy No. 111802/21/08/0100001845 which is issued in favour of the its owner Mohd. Abbas S/O Sh. Ghulam Sheikh. The intimation of the cancellation of the policy was sent to him on 10.04.2009 by registered post much prior to the date of accident. So, the answering respondent is not liable to indemnify Mohd. Abbas who is the owner of the offending vehicle no.JK02G-5217."
9. No less important is the plea of the owner taken by him in the objections filed before the Tribunal. As per the averments made by the owner, Shahnawaz Ahmed Bhat in his objections he had insured the offending vehicle with MA No. 491/2011&MA No. 446/2011 Page 6 of 33 the appellant insurer under policy No. 111802/21/08/0100001845 effective from 12.03.2009 to midnight of 11.03.2010 through authorised agent of the company at Kishtwar, namely, Neeraj Gupta. It is claimed that the premium of Rs.9137/- was paid in cash to the aforesaid Agent. Later on after the accident occurred, he came to know that the said agent of the appellant insurer had instead of depositing the premium amount received by him in cash had issued some cheque, which was dishonoured by the bank due to insufficient funds in the account of the insurance Agent Neeraj Gupta. The certificate of insurance of offending vehicle placed on record shows that the offending vehicle owned by one Mohd Abbas, was insured with the appellant insurer and effective date of the commencement of the insurance was 12.03.2009 and insurance was to remain valid till midnight of 11.03.2010. The accident took place on 31.05.2009, i.e., during the currency of the insurance cover. There is also no denial of the fact, as is also borne out from the communication dated 10.04.2009 issued by the appellant insurer, that on account of dishonouring of the cheque representing the premium amount of the policy, the appellant insurer had cancelled the policy and the certificate of insurance qua the offending vehicle. It is, thus, on the date of accident, i.e., 31.05.2009, the MA No. 491/2011&MA No. 446/2011 Page 7 of 33 appellant insurer, had cancelled the insurance policy and the certificate of insurance for the reason that the cheque issued on behalf of the owner of the vehicle towards premium had been dishonoured by the bank. This fact, as is claimed by the appellant insurer had been duly notified to the owner of the vehicle Mr. Mohd Abbas, who had obtained the insurance cover for the offending vehicle. It is also noteworthy that though the vehicle was earlier owned by Mohd Abbas, but, respondent No.4 (who was arrayed as owner of the vehicle in the claim petition) had purchased the same and the registration certificate had indicated such transfer of the vehicle from the erstwhile owner Mohd Abbas to respondent No.4 Shahnawaz Ahmed Bhat. The respondent No.4 along with his objections also placed on record the copy of registration certificate, a perusal whereof clearly shows that w.e.f. 31.12.2008, Shri Shahnawaz Ahmed Bhat-respondent No.4 and not Mohd. Abbas was the registered owner of the vehicle. It is not understandable as to how and under what circumstances, the offending vehicle, which at the time of issuing the insurance policy was owned by respondent No.4 came to be insured in the name of the erstwhile registered owner, i.e., Mohd Abbas. Interestingly, the insured Mohd Abbas was not arrayed as party respondent in the claim petition nor the driver MA No. 491/2011&MA No. 446/2011 Page 8 of 33 respondent No.5, who caused the accident by his rash and negligent driving was claimed to be in the employment of the insured Mohd Abbas. No relationship of Master and Servant or Principal and Agent has been claimed between erstwhile registered owner Mohd Abbas and the driver of the offending vehicle who caused the accident in question. This was admitted position of facts before the Tribunal.
10. In the aforesaid factual backgrounds, the appellant insurer claims that the company cannot be held liable to indemnify the insured, i.e., Mohd Abbas for the negligent act of the driver of the offending vehicle, who was neither under his employment nor there was any relationship Principal and Agent between the two. It also claims that on the date the accident occurred, there was no insurance policy in existence and the same had been cancelled on account of failure of the insured to pay the premium to the company. On the analogy, the insurer, therefore, seeks to avoid its liability to indemnify the insured.
11. Per contra, learned counsel appearing for the claimants submits that the liability of the insurer is statutory and imposed by the provisions of Section 149(1) of the Motor Vehicles Act, 1988 (hereinafter referred to as the Act of 1988) and therefore, once the insurer has issued the policy of insurance, it cannot escape from its liability to satisfy the award qua third party, MA No. 491/2011&MA No. 446/2011 Page 9 of 33 notwithstanding that the insurer may be entitled to avoid or cancel or may have avoided or cancelled the policy and in such situation, he can only have a right to recover the amount from the insured. It is thus, urged that the legislature by enacting Section 149(1) has protected the rights of third party, the victim of the motor vehicular accident. It is stated that since the vehicle in question was duly insured at the time of accident and the offending vehicle was covered against third party risk, it would be irrelevant as to who is the registered owner and in whose favour the insurance certificate has been issued. It is urged that it was the duty of the insurer to issue the insurance policy after verifying the registered owner. It could not have issued the certificate of the insurance or insurance policy in favour of erstwhile owner, who had since ceased to be the owner after transfer of the registration in favour of the Vendee to whom the vehicle had been sold. Reference in this regard was invited to Sections 146, 147 and 157 of the Act of 1988. The respondents-claimants have relied upon several judgments rendered by the Hon‟ble Supreme Court and different High Courts of the Country in support of their pleas.
12. Having heard learned counsel for the parties and perused the record, it would be necessary to first set out some salient provisions of the Act of 1988, which are MA No. 491/2011&MA No. 446/2011 Page 10 of 33 relevant in the context of controversy that has arisen in these appeals. Chapter XI of the Act deals with the insurance of the motor vehicle against third party. Section 146 makes it mandatory to insure the motor vehicle against third party risk and prohibit the use of any motor vehicle in a public places if it is not so insured. Section 146 which makes this provision is reproduced hereunder:-
146 Necessity for insurance against third party risk. --
(1) 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 this Chapter: 26 [Provided that in the case of a vehicle carrying, or meant to carry, dangerous or hazardous goods, there shall also be a policy of insurance under the Public Liability Insurance Act, 1991 (6 of 1991).] Explanation. --A person driving a motor vehicle merely as a paid employee, while there is in force in relation to the use of the vehicle no such policy as is required by this sub-
section, shall not be deemed to act in contravention of the sub-section unless he knows or has reason to believe that there is no such policy in force.
(2) Sub-section (1) shall not apply to any vehicle owned by the Central Government or a State Government and used for Government purposes unconnected with any commercial enterprise.
(3) The appropriate Government may, by order, exempt from the operation of sub-section (1) any vehicle owned by any of the following authorities, namely:--
MA No. 491/2011&MA No. 446/2011 Page 11 of 33(a) the Central Government or a State Government, if the vehicle is used for Government purposes connected with any commercial enterprise;
(b) any local authority;
(c) any State transport undertaking:
Provided that no such order shall be made in relation to any such authority unless a fund has been established and is maintained by that authority in accordance with the rules made in that behalf under this Act for meeting any liability arising out of the use of any vehicle of that authority which that authority or any person in its employment may incur to third parties. Explanation. --For the purposes of this sub- section, "appropriate Government" means the Central Government or a State Government, as the case may be, and--
(i) in relation to any corporation or company owned by the Central Government or any State Government, means the Central Government or that State Government;
(ii) in relation to any corporation or company owned by the Central Government and one or more State Governments, means the Central Government;
(iii) in relation to any other State transport undertaking or any local authority, means that Government which has control over that undertaking or authority.
13. Section 147 which enumerates the essential requirements of the policies and limits of liability also deserves to be noticed and is set out below:-
147 Requirements of policies and limits of liability. --
(1) In order to comply with the requirements of this Chapter, a policy of insurance must be a policy which--MA No. 491/2011&MA No. 446/2011 Page 12 of 33
(a) is issued by a person who is an authorised insurer; and
(b) insures the person or classes of persons specified in the policy to the extent specified in sub-section (2)--
(i) against any liability which may be incurred by him in respect of the death of or bodily 27 [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;
(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:
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 conductor of the vehicle or in examining tickets on the vehicle, or
(c) if it is a goods carriage, being carried in the vehicle, or
(ii) to cover any contractual liability.
Explanation. --For the removal of doubts, it is hereby declared that the death of or bodily injury to any person or damage to any property of a third party shall be deemed to have been caused by or to have arisen out of, the use of a vehicle in a public place notwithstanding that the person who is dead or injured or the property which is damaged was not in a public place at the time of the accident, if the act or omission which led to the accident occurred in a public place.
MA No. 491/2011&MA No. 446/2011 Page 13 of 33(2) Subject to the proviso to sub-section (1), a policy of insurance referred to in sub-section (1), shall cover any liability incurred in respect of any accident, up to the following limits, namely:--
(a) save as provided in clause (b), the amount of liability incurred;
(b) in respect of damage to any property of a third party, a limit of rupees six thousand:
Provided that any policy of insurance issued with any limited liability and in force, immediately before the commencement of this Act, shall continue to be effective for a period of four months after such commencement or till the date of expiry of such policy whichever is earlier.
(3) A policy shall be of no effect for the purposes of this 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.
(4) Where a cover note issued by the insurer under the provisions of this Chapter or the rules made thereunder is not followed by a policy of insurance within the prescribed time, the insurer shall, within seven days of the expiry of the period of the validity of the cover note, notify the fact to the registering authority in whose records the vehicle to which the cover note relates has been registered or to such other authority as the State Government may prescribe.
(5) Notwithstanding anything contained in any law for the time being in force, an insurer issuing a policy of insurance under this section shall be liable to indemnify the person or classes of persons specified in the policy in respect of any liability which the policy purports to cover in the case of that person or those classes of persons.MA No. 491/2011&MA No. 446/2011 Page 14 of 33
14. From plain reading of Sections 146 and 147, it is clear that no person can use except as a passenger, or allow any other person to use, a motor vehicle in a public place, unless such person is insured in relation to the use of the vehicle by a policy of insurance complying with requirements as laid down in Section 147 of the Act. It requires no emphasis that a contract of insurance is nothing, but, a contract of indemnity. In a case of accident, the primary liability under law for payment of compensation is that of the driver of the offending vehicle. The owner of the vehicle also becomes vicariously liable for the act of his Agent. However, in a case involving a third party to the contract of insurance, by operation of Section 147 of the Act, 1988 providing for a compulsory insurance, the insurer becomes statutorily liable to indemnify the owner. There could be no dispute that the insurance company would be liable to indemnify the insured in respect of loss suffered by third party or in respect of the damages for the loss of property in the accident. Therefore, in a case where the liability is statutorily fastened upon the insurance, it would be bound to indemnify the insured unless exceptions contained in Section 149 of the Act are attracted. The liability of the insured whether based on the contract of insurance, which is nothing but a contract of indemnity or is statutory under MA No. 491/2011&MA No. 446/2011 Page 15 of 33 Section 149 or otherwise, it only pertains to the extent of indemnifying the owner/insured. For better understanding the aforesaid proposition, it would be necessary to take the note of the provisions of Section 149 as well. For facility of reference is reproduced as under:-
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 (l) of section 147 (being a liability covered by the terms of the policy) 1[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 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:--
MA No. 491/2011&MA No. 446/2011 Page 16 of 33(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 Insurance Act, 1938 (4 of 1938) and whether or not he is registered under the corresponding law of the 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 MA No. 491/2011&MA No. 446/2011 Page 17 of 33 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 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 MA No. 491/2011&MA No. 446/2011 Page 18 of 33 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. Explanation.--For the purposes of this section, "Claims Tribunal" means a Claims Tribunal constituted under section 165 and "award" means an award made by that Tribunal under section 168.
15. From careful reading of Section 149 of the Act, 1988, it becomes crystal clear that once the certificate of insurance in terms of Sub Section 3 of Section 147 has been issued in favour of the person by whom a policy has been effected, the judgment or award in respect of any such liability as is required to be covered by the policy under Clause (b) of Sub Section (1) of Section 147 of the Act (being a liability covered by the terms of policy) or under the provisions of Section 163-A obtained against any person insured, then the insurer shall be liable to discharge such liability notwithstanding that the insurer may be entitled to avoid or cancel or may have avoided or cancelled the policy. This liability towards third party is statutory in nature and therefore, overrides any provision to the contrary contained in the contract.
16. From the reading of Section 149, what is significant to note is that the liability to indemnify is towards the insured, who becomes liable to pay compensation to the third party, and is in relation to the use of the vehicle MA No. 491/2011&MA No. 446/2011 Page 19 of 33 owned by the insured. The liability whether contractual or statutory, which the insurer owes is towards the person insured and is not qua the vehicle irrespective of its owner, who has got the insurance cover by payment of premium to the insurer. When seen in this context, it is abundantly clear that the appellant insurance company had insured one Mohd Abbas, who was not the registered owner of the offending vehicle at the time of insurance and had received a cheque for the premium also on his behalf. The contract of insurance, which came into existence enjoined the appellant insurance company to indemnify the insured Mohd. Abbas for any loss occasioned to him in the use of the offending vehicle. Admittedly, the Tribunal has not held Mohd Abbas liable, directly or vicariously for payment of compensation to the claimants. As a matter of fact, the claimants have no grievance against Mohd Abbas and have, thus, not arrayed him as party respondent. The claimants also do not allege that the driver of the offending vehicle, who caused accident claiming the life of Abdul Hussain was in the employment of Mohd Abbas or there existed any relationship of Master and Servant or Principal and Agent between the two. The respondents have arrayed Shahnawaz Ahmed Bhat, who was registered owner of the offending vehicle at the time of accident as the party MA No. 491/2011&MA No. 446/2011 Page 20 of 33 respondent. Though, the said owner was not insured by the appellant insurance company by issuing any certificate of insurance or insurance policy. Shri Vaid Raj- respondent No.5, the driver of the offending vehicle was an employee of respondent No.4- Shahnawaz Ahmed Bhat. That being the position, it would be difficult rather impermissible to hold the insured Mohd Abbas liable to compensate the claimants for the act of rash and negligent driving of Shri Vaid Raj- the driver of the offending vehicle engaged by respondent No.4-Shahnawaz Ahmed Bhat. There is no contract of indemnity between the appellant insurer and Shahnawaz Ahmed Bhat. The contract of indemnity, if any, was between the appellant insurer and erstwhile owner of the offending vehicle Mohd Abbas. Since Mohd Abbas, has not been fastened any liability by the Tribunal and, therefore, there could be no liability of the insurer, statutory or contractual, to indemnify Mohd Abbas, and in lieu of him, pay the compensation to the claimants. This aspect has been given a complete miss by the Tribunal. The Tribunal first committed the error in not striking out the specific issue despite there being pleadings available in the file; and secondly it failed to appreciate the core issue involved in the petition touching upon the liability of the appellant insurer to indemnify the insured. The plea of the learned MA No. 491/2011&MA No. 446/2011 Page 21 of 33 counsel for the respondents-claimants, however, is that the insurance company and his Agents should have been vigilant enough to verify the proposal submitted for insurance and should not have insured Mohd Abbas as the owner of the offending vehicle when he had since ceased to be its registered owner. The plea of the claimants does not hold much water and, therefore, cannot be accepted. It is not in dispute that the offending vehicle was earlier owned by Mohd Abbas, but, later on it was sold to respondent No.4 and the necessary correction in the certificate of registration was effected. On the date of accident, it was respondent No.4 and not Mohd Abbas, who was the registered owner. It was, thus, for respondent No.4 to have been vigilant enough to see that he is actually insured by the insurer qua the offending vehicle. It is not the case of the claimants that the insurance company had been informed about the transfer of the vehicle or had been provided with fresh certificate of registration indicating that the respondent No.4 had become the registered owner of the offending vehicle after he had purchased it from Mohd Abbas. Whatever was proposed by the insured was taken note of by the insurer and, accordingly, a policy of insurance was issued. That apart, the certificate of insurance remained with Shahnawaz Ahmed Bhat, who could have easily discerned MA No. 491/2011&MA No. 446/2011 Page 22 of 33 that the policy of insurance has been issued in favour of erstwhile owner Mohd Abbas. In such circumstances to blame the insurance company for the lapse would be highly unjustified. The lapse, if any, is of the respondent No.4 and the insurance company cannot be made liable for the lapse of the respondent No.4. In absence of any contract of indemnity between respondent No.4 and appellant insurance company, the company cannot be held liable to compensate the third party. So far as the plea of the appellant insurer that on account of dishonour of cheque of premium and subsequent cancellation of the policy, it was not liable to pay any compensation as there was no policy of insurance in existence on the date of accident is concerned, it flies on the face of provision of Section 149 Act of 1988. Once the certificate of insurance has been issued by the insurance company in favour of a person for whom the policy has been effected, it becomes liable to pay compensation to the third party, which is otherwise payable by the insured. This is essence of the contract of indemnity and the statutory liability created under Section 149 of the Act of 1988. This liability of the insurance company would subsist notwithstanding that the insurer may have cancelled the policy for any breach committed by the insured. That being so, the mere fact that the cheque issued for payment of premium of the MA No. 491/2011&MA No. 446/2011 Page 23 of 33 policy was dishounred and the insurance company had cancelled the policy would not absolve the insurer company to pay compensation to the third party, though it may recover the same from the owner, who is found to have committed the fundamental breach of material term and condition of the policy. This position of law is affirmed by the Supreme Court in the case of Oriental Insurance Co.Ltd. v. Inderjit Kaur and others, (1998)1 SCC 371 and New India Assurance Co.Ltd. Vs. Rula and others, (2000) 3 SCC 195. The observation of the Supreme Court made in paragraphs 9 and 10 of the judgment rendered in the case of Inderjit Kour‟s case (supra) are noteworthy and reproduced here under:-
"9. Section 149 refers to the duty of insurers to satisfy judgments and awards against persons insured in respect of third party risks. Subsection (1) thereof 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 MA No. 491/2011&MA No. 446/2011 Page 24 of 33 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.''
10. The contract of insurance in respect of motor vehicles has, therefore, to be construed in the light of the above provisions. Section 146(1) contains a prohibition on the use of the motor vehicles without an insurance policy having been taken in accordance with Chapter XI of the Motor Vehicles Act. The manifest object of the provision 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."
17. The three-Judge Bench judgment has been followed in series of cases decided by the Supreme Court and various High Courts thereafter. The legal position as settled in the case of Inderjit Kour is, therefore, not open to debate any more. Learned counsel for the appellant- insurance company has, however, relied upon the judgment of the Supreme Court rendered in the case of Deddapa and others V. The Branch Manager, National Insurance Co. Ltd., 2008(2) SCC 595 and has drawn attention of this Court to paragraph No.24 of the judgment which reads as under:-
"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 MA No. 491/2011&MA No. 446/2011 Page 25 of 33 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."
18. Relying upon the aforesaid judgment and referring to paragraph No.24, learned counsel for the appellant-insurer argues that in the instant case, the certificate of insurance/insurance policy which had been issued in favour of erstwhile owner of the offending vehicle Mohd Abbas stood cancelled before the occurrence of the accident and proper intimation in this regard has been given to Sh. Mohd Abbas. He, therefore, urges that the instant case is fully covered by the judgment rendered in the case of Deddappa and others (supra).
19. On the conspectus of the judicial precedents on the issue, it can be safely held that once the insurance company issues a certificate of insurance/insurance policy, in terms of Sub Section 3 of the Section 147 of the Act, it will incur a statutory liability to indemnify the insured against third party risk, notwithstanding the fact that the insurance company may be entitled to avoid or cancel or may have avoided or cancelled the policy. The statutory prescription contained in Section 149 of the Act is clear and unequivocal. In the instant case, due to dishonour of the cheque paid on account of premium, the company had cancelled the policy under an intimation to MA No. 491/2011&MA No. 446/2011 Page 26 of 33 the owner Mohd Abbas, yet, vis-à-vis third party it was statutory liable created by Section 149 of the Act. I am, therefore, not in agreement with the arguments of learned counsel for the appellant-insurance company.
20. This brings me to the crucial issue as to whether the appellant insurance company would be liable to indemnify the insured and pay the compensation to the third party even if no liability is incurred by the insured under law. Looking to the different provisions of the Act, the nature of the contract, the policy of insurance is and nature of the liability of the driver and owner of the offending vehicle in a motor vehicular accident, it can safely be held that unless an insured is held liable to compensate the third party, who has been wronged by use of offending vehicle (insured vehicle) in the legally constituted proceedings, the insurer cannot be called upon to indemnify the insured and pay the compensation to the third party. Admittedly, in the instant case, the insured Mohd Abbas was never arrayed as party respondent nor the Tribunal has fastened any liability upon him to pay compensation to the claimants. The Tribunal, however, has held respondent No.4 registered owner (not insured with the insurance company) liable to pay compensation to the claimants on account of the accident caused due to rash and negligent driving of his Agent respondent No.5.
MA No. 491/2011&MA No. 446/2011 Page 27 of 33In such situation, it is not legally permissible to hold the appellant insurance company liable to compensate the respondent No.4 with whom the appellant insurer has no privity of contract. The judgments relied upon by the counsel for the claimants, particularly, the judgment in the case of Firdaus v. Oriental Insurance Co.Ltd. and others, (2017) 15 SCC 674 which is based on the dictum of law laid down in the case of Rishi Ram v. Sukhrania, (2003) 3 SCC 97 have been rendered in different fact situations. The instant case, is not the case where during the currency of a valid contract of insurance, the registration of the vehicle had been transferred to a new owner and with regard to which there was no intimation given to the insurance company. In the instance case, the policy of insurance was taken when the ownership of the vehicle had already stands transferred from Mohd Abbas to respondent No.4, yet, respondent No.4 being aware that he was the registered owner of the vehicle got the vehicle insured in the name of Mohd Abbas, who had ceased to be the owner. This was negligence on the part of the respondent No.4 for which the appellant insurance company cannot be blamed. It is not the case of anybody that the company had been intimated that Mohd Abbas had ceased to be owner and that respondent No.4 was registered owner of the vehicle when the contract of MA No. 491/2011&MA No. 446/2011 Page 28 of 33 insurance was taken or even thereafter. I am not in agreement with the view taken by the Tribunal that there was negligence on the part of the insurance company also which issued the certificate of insurance in favour of Mohd Abbas, who had ceased to be the registered owner of the vehicle and that the insurance company should have made the necessary verification in this regard. I am afraid that the view of the Tribunal is not sustainable for the simple reasons that the company would insure the vehicle on the basis of the proposal submitted to it. If the company was provided the documents, which indicated that vehicle to be insured was owned by Mohd Abbas, it had no reason to further verify whether Mohd Abbas had ceased to be the owner or that the vehicle had been transferred to some other person.
21. For the forgoing reasons, I allow this appeal of the insurance company and hold that in the given facts and circumstances of this case, the appellant insurer is not liable to indemnify the respondent No.4 nor can be called upon to pay the awarded compensation to the claimants. The satisfaction of the award, as modified hereinafter, shall be responsibility of the owner and shall be paid by him to the claimants.
MA No. 491/2011&MA No. 446/2011 Page 29 of 33MA No. 446/2016.
1. This appeal is filed by the claimants for enhancement of the awarded compensation. The Tribunal has awarded the compensation in the following manner:-
(i) Loss of dependency : Rs. 7,68,096.00
(ii) Funeral expenses : Rs. 5,000.00
Total : Rs. 7,73,100.00
2. The claimants have also been held entitled to simple interest @ 7.5. per annum on the awarded amount. The claimants submit that they were entitled to higher amount of compensation, but, the same was denied to them by the Tribunal arbitrarily and without taking note of the settled legal position. It is claimed that deceased at the time of death was earning Rs.8000/- and was also getting daily allowance of Rs.50/-, but, the Tribunal took the income of the deceased as Rs.8000/- instead of Rs.9050/- per month. The Tribunal, it is claimed, also committed another error by applying the multiplier on the basis of age of the mother of the deceased whereas as per the law down in the case of Sarla Verma Vs. Delhi Transport Corporation, reported in (2009) 6 SCC 121, it should have been on the basis of the age of the deceased. The claimants, therefore, claim that since the deceased at the time of death was 25 years and therefore, the appropriate multiplier to be MA No. 491/2011&MA No. 446/2011 Page 30 of 33 applied was 17 and not the 12, which has been applied by the Tribunal. The claimants further submit that since the deceased was 25 years old and self-employed, therefore, there should have been enhancement by 40% of the established income by way of loss of future prospectus. Reliance is placed on Pranay Sethi‟s judgment (AIR 2017 SC 5157).
3. Having heard learned counsel for the parties and perused the record, I am of the view that the award passed by the Tribunal calls for enhancement in the manner mentioned hereinafter. On the basis of the evidence led, the Tribunal has found that the income of the deceased at the time of accident was Rs.8000/- per month, which was the monthly salary deceased was receiving from his employer, i.e., M/s Lucky Auto Works, Kishtwar. The Tribunal, however, has not found any evidence of payment of an extra allowance of Rs.50/- per day to the deceased. I have no reason to differ with the findings of fact recorded by the Tribunal upon proper evaluation of evidence. However, I am in agreement with the learned counsel for the claimants that the Tribunal did not apply the correct multiplier which as per Sarla Verma' case should have been applied on the basis of the age of deceased. Since the deceased at the time of death was 25 years of age old, therefore the multiplier of 18 was applicable. There can be no dispute that as laid MA No. 491/2011&MA No. 446/2011 Page 31 of 33 down in the case of Pranay Sethi, there ought to be enhancement by 40% of the established income of deceased by way of future prospectus. Since the deceased was bachelor, as such, deduction on account of personal expenses ought to be one half of the estimated income. Accordingly, the loss of dependency and the compensation payable has to be reworked in the following manner:-
(i) Monthly income of the deceased : Rs. 8000.00
(ii) Add 40% of the income : Rs.8000+3200= Rs. 11200
(iii) Annual income of the deceased: Rs.11200 x 12= Rs.1,34,400/-
(iv) Deduction @1/2nd from the annual income of the deceased towards personal expenses of the deceased: Rs. 1,34,400 x 1/2 = Rs. 67200/-.
(v) By applying the appropriate multiplier 18 , total
loss of dependency would come to
Rs. 67200 x 18 = Rs.12,09,600/-
(vi) The claimant shall also be
entitled to funeral expenses
to the tune of Rs. 15,000/-
(vii) Loss of estate Rs., 15,000/-
(viii) Loss of parental consortium
@ Rs. 40000/- each Rs. 80,000/-
Total : Rs.13,19,600/-.
(Rupees Thirteen Lac Nineteen Thousand and Six Hundred only) MA No. 491/2011&MA No. 446/2011 Page 32 of 33
4. The award amount is, thus, modified to the aforesaid extent. The claimants are held entitled to the compensation aforesaid, which shall be released to them in the manner as provided in the award. The rate of interest granted by the Tribunal is maintained.
5. The appeals are, accordingly, disposed of.
Jammu (Sanjeev Kumar)
10.05.2019 Judge
(Madan-PS)
MADAN LAL VERMA
2019.05.15 13:36
I attest to the accuracy and
integrity of this document
MA No. 491/2011&MA No. 446/2011 Page 33 of 33