Delhi High Court

Bimla Gupta & Ors. vs Mahinder Singh And Ors. on 26 September, 2011

Author: Reva Khetrapal

                                           REPORTED
*    IN THE HIGH COURT OF DELHI AT NEW DELHI
+          FAO 51/1991 and CM No.1012/2001

BIMLA GUPTA & ORS.                              ..... Appellants
                         Through:    Mr. Navneet Goyal, Advocate
             versus
MAHINDER SINGH AND ORS.                          ..... Respondents
                    Through:         Mr. Ram N. Sharma, Advocate
                                     for the respondent No.3

%                        Date of Decision : September 26, 2011

CORAM:
HON'BLE MS. JUSTICE REVA KHETRAPAL
1. Whether reporters of local papers may be allowed
   to see the judgment?
2. To be referred to the Reporter or not?
3. Whether judgment should be reported in Digest?

                         JUDGMENT

: REVA KHETRAPAL, J.

1. By way of this appeal, the appellants seek to assail the

judgment and award of the learned Motor Accidents Claims Tribunal

dated 4th December, 1990 on the ground that a very meagre amount of

compensation has been awarded to them which deserves to be

enhanced. It is also prayed that the liability of the Insurance

Company may be held to be unlimited and the Insurance Company

may be ordered to pay the entire amount of compensation payable to

them.

2. The appellant No.1 is the widow and the appellants No.2, 3 and

4 are the sons of one Shri Jagan Nath Gupta, who met with a road

accident on 12.05.1980, resulting in his demise. The appellants No.5

and 6 are the parents of the deceased. In the claim petition filed by

them, it is asserted by the appellants that the deceased was aged about

31 years at the time of his unfortunate death and was a Government

contractor, working as a partner of M/s. Jagan Nath Ashok Kumar.

The income of the deceased in the Claim Petition is stated to be in the

sum of ` 4,500/- per month at the time of his death in the accident.

The appellants claimed a sum of ` 10 lakhs as compensation from the

respondent No.1, the driver of the offending truck, the respondent

No.2, the owner of the said truck and the respondent No.3, M/s.

Oriental Insurance Co. Ltd. with whom the truck in question was

insured by the respondent No.2. The learned Tribunal, after holding

an enquiry, concluded in favour of the appellants that the deceased

Jagan Nath had received fatal injuries in the accident on 12.05.1980

on account of the rash and negligent driving of truck No.DHG-612 by

the respondent No.1, and held the respondents liable to pay

compensation to the appellants in the sum of ` 4,32,000/- with

interest at the rate of 6% per annum from the date of the filing of the

petition till the date of realisation. The learned Tribunal, however,

held the liability of the Insurance Company to be limited to the extent

of ` 50,000/- and directed the respondent No.1 and 2 to pay the award

amount exceeding ` 50,000/- alongwith proportionate interest

thereon.

3. Feeling aggrieved, the appellants have preferred the present

appeal seeking an award of ` 10 lakhs with interest at the rate of 15%

per annum.

4. Arguments were addressed by Mr. Navneet Goyal, the learned

counsel for the appellants, who assailed the award on the following

grounds:

(i) The learned Tribunal erred in not taking into account the

future prospects of the deceased despite the fact that the

deceased was a Government contractor and an income-

tax assessee, and there was documentary evidence on

record to show that his income was increasing year by

year.

(ii) The learned Tribunal erred in deducting one-third (1/3rd)

of the income of the deceased towards his personal

expenses, whereas keeping in view the fact that the

deceased had six dependent family members, a

deduction of not more than one-fourth (1/4th) of his

income towards his personal expenses was justified.

(iii) The learned Tribunal ought to have granted interest at

the rate of 15% per annum and, in any case, not less than

9% per annum, whereas the learned Tribunal has

awarded interest at the rate of 6% per annum on the

award amount.

(iv) No amount whatsoever was awarded by the learned

Tribunal for the funeral expenses of the deceased and

towards non-pecuniary damages.

5. Mr. Ram N. Sharma, the learned counsel for the respondent

No.3-Insurance Company, on the other hand, sought to support the

award on the ground that the award was just and fair to the appellants,

and in consonance with the guidelines laid down by the Supreme

Court from time to time. Mr. Sharma invited the attention of this

Court to the income-tax assessment orders for the assessment years

1978-79 (Ex.PW2/1), 1979-80 (Ex.PW2/2) and 1980-81 (Ex.PW2/3),

to contend that the said assessment orders clearly showed that the net

income of the deceased was ` 39,589/- for the assessment year 1978-

79, ` 36,151/- for the assessment year 1979-80 and ` 38,540/- for the

assessment year 1980-81, which income included rental income from

a factory building from M/s. Gupta Industries in the sum of ` 9,628/-.

He contended that the said amount of ` 9, 628/- is to be excluded for

the purpose of computing the income of the deceased, in view of the

fact that the legal representatives of the deceased were still receiving

the said rental income. Mr. Sharma also contended that the deceased

was a self-employed person and his income-tax returns clearly

showed that his income was on the descending scale and there was,

therefore, no question of taking into account any future increase in the

income of the deceased, as sought for by the appellants. As regards

the multiplier adopted by the learned Tribunal for augmenting the

multiplicand constituting the loss of dependency of the appellants,

Mr. Sharma contended that the learned Tribunal had erroneously

applied the multiplier of 18, and that 16 is the appropriate multiplier

which should have been applied keeping in view the fact that the

deceased was admittedly in the age group of 31 to 35 years of age.

6. Having heard the learned counsel for the parties, I am inclined

to agree with the contention of Mr. Sharma, the learned counsel for

the respondent No.3, that the learned Tribunal rightly did not take into

account the prospects of future increase in the income of the

deceased. The deceased was a self-employed person, being a

Government contractor, and as held by the Supreme Court in the case

of Smt. Sarla Verma and Ors. vs. Delhi Transport Corporation and

Anr. (2009) 6 SCC 121, where the deceased is self-employed, the

Courts will usually take into account only the actual income of the

deceased at the time of death. A departure therefrom should be made

only in rare and exceptional cases involving special circumstances.

The question which arises for consideration is whether the present

case can be said to fall in the category of a rare and exceptional case

involving special circumstances. The income-tax assessment orders

of the deceased placed on record (Ex.PW2/1 to Ex.PW2/3) clearly

show that the net income of the deceased for the year 1979-80 was

less than his income for the assessment year 1978-79. Further, the

total income of the deceased for the year 1980-81, though was

marginally more than for the year 1979-80, was nevertheless less than

that for the year 1978-79. This being so, the contention of Mr. Goyal,

that the future prospects of advancement of the deceased in his career

should be sounded in terms of money to augment the multiplicand,

cannot be accepted. I am, therefore, constrained to hold that the

learned Tribunal rightly assessed the income of the deceased to be in

the sum of ` 3,000/- per month for the assessment year 1980-81 after

deducting the rental income of ` 9,628/- from the total income, that

is, ` 45,386/- minus ` 9,628/- = ` 35,758/-, rounded off to ` 36,000/-.

7. I am, however, inclined to agree with and uphold Mr. Goyal‟s

contention that keeping in view the fact that the deceased was

survived by his widow, three minor children and parents, the learned

Tribunal ought to have made a deduction of not more than one-fourth

(1/4th) of the income of the deceased towards his personal expenses

and maintenance. Thus calculated, the loss of dependency of the

appellants would have worked out to ` 2,250/- per month or say

` 27,000/- per annum. It is the settled position of law that this

multiplicand must be augmented by the use of an appropriate

multiplier in accordance with the age of the deceased. In this context,

Mr. Goyal very fairly conceded that the multiplier for the age group

of deceased persons between 31 and 35 years of age in consonance

with the judgment of the Supreme Court rendered in the case of Sarla

Verma (supra) was the multiplier of 16 (instead of the multiplier of

18 applied by the Tribunal). Applying the multiplier of 16 to the

multiplicand of ` 27,000/-, the total loss of dependency of the

appellants works out to ` 4,32,000/-.

8. I also find justification in the grievance of the learned counsel

for the appellants that no amount whatsoever has been awarded by the

learned Tribunal for the funeral expenses of the deceased and under

any of the non-pecuniary heads. The appellants are accordingly

awarded a sum of ` 2,000/- towards funeral expenses and a further

sum of ` 2,500/- each under the heads of loss of consortium, loss of

estate and loss of love and affection of the deceased, that is, in all

` 4,41,500/-, which may be rounded off to ` 4,42,000/-. On the

aforesaid amount, the appellants are held entitled to interest at the rate

of 9% per annum from the date of the filing of the petition till the date

of realisation. It is clarified that interest at the flat rate of 9% per

annum is awarded keeping in view the fact that the rate of interest

from the year 1980 till date has varied from 18% per annum to 6%

per annum.

9. The only other aspect of the matter which remains to be

considered is the contention of the learned counsel for the appellants

that even assuming the liability of the Insurance Company to be a

limited one as pleaded by the respondent No.3, the appellants, being

third parties, are nevertheless entitled to receive the entire amount of

compensation from the Insurance Company. Reliance is placed by

Mr. Goyal in this regard on Section 96 of the Motor Vehicles Act,

1939 read with the avoidance clause captioned „Avoidance of Certain

Terms and Rights of Recovery‟ contained in the insurance policy as

well as the „Important Notice‟ in the Schedule to the Policy,

Ex.RW1/1. The avoidance clause states that nothing in the policy or

any endorsement thereon shall affect the right of any person

indemnified by the policy or any other person to recover an amount

under or by virtue of the provisions of the Act. It also provides that

the insured will repay to the Company all sums paid by it which the

Company would not have been liable to pay but for the said

provisions of the Act. The „Important Notice‟ mentions that any

payment made by the Company by reason of wider terms appearing in

the certificate in order to comply with the Motor Vehicles Act, 1939

is recoverable from the insured. It also specifically refers to the

avoidance clause.

10. In New Asiatic Insurance Co. Ltd. vs. Pessumal Dhanamal

Aswani and Others, 1958-65 ACJ 559, the Supreme Court

interpreted the avoidance clause and the important notice as follows:

(ACJ, P.565, paras 21 and 22)

"21. The Act contemplates the possibility of the policy of insurance undertaking liability to third parties providing such a contract between the insurer and the insured, that is, the person who effected the policy, as would make the company entitled to recover the whole or part of the amount it has paid to the third party from the insured. The insurer thus acts as security for the third party with respect to its realising damages for the injuries suffered, but vis-a-vis the insured, the company does not undertake that liability or undertake it to a limited extent. It is in view of such a possibility that various conditions are laid down in the policy. Such conditions, however, are effective only between the insured and the company, and have to be ignored when considering the liability of the company to third parties. This is mentioned prominently in the policy itself and is mentioned under the heading 'Avoidance of certain terms and rights of recovery', as well as in the form of 'an important notice' in the Schedule to the policy. The avoidance clause says that nothing in the policy or any endorsement thereon shall affect the right of any person indemnified by the policy or any other person to recover an amount under or by virtue of the provisions of the Act. It also

provides that the insured will repay to the company all sums paid by it which the company would not have been liable to pay but for the said provisions of the Act. The 'Important Notice' mentions that any payment made by the company by reason of wider terms appearing in the certificate in order to comply with the Act is recoverable from the insured, and refers to the avoidance clause.

22. Thus the contract between the insured and the company may not provide for all the liabilities which the company has to undertake vis-a-vis the third parties, in view of the provisions of the Act. We are of opinion that once the company had undertaken liability to third parties incurred by the persons specified in the policy, the third parties' right to recover any amount under or by virtue of the provisions of the Act is not affected by any condition in the policy. Considering this aspect of the terms of the policy, it is reasonable to conclude that proviso (a) of para 3 of section II is a mere condition affecting the rights of the insured who effected the policy and the persons to whom the cover of the policy was extended by the company, and does not come in the way of third parties' claim against the company on account of its claim against a person specified in para. 3 as one to whom cover of the policy was extended."

11. In Amrit Lal Sood v. Kaushalya Devi Thapar, 1998 ACJ 531,

the Supreme Court, placing reliance upon the case of New Asiatic

Insurance Co. Ltd. (supra), reiterated that the avoidance clause is

effective only between the insured and the Insurance Company and

not a third party. In paragraph 14 of the Report, it observed thus:

"14. The above clause does not enable the insurance company to resist or avoid the claim made by the claimant. The clause will arise for consideration only in a dispute between the insurer and insured. The question whether under the said clause the insurer can claim repayment from the insured is left open. The circumstance that the owner of the vehicle did not file an appeal against the judgment of single judge of the High Court under the Letters Patent may also be relevant in the event of a claim by the insurance company against the insured for repayment of the amount. We are not concerned with that question here."

12. In Oriental Insurance Co. Ltd. vs. Cheruvakkara Nafeessu

and Others, 2001 ACJ 1 again the question before the Supreme Court

was:

"What is the extent of liability of an insurance company towards the third party as per section 95(2)(b) of Motor Vehicles Act, 1939 (hereinafter called „the Act‟), and what are its rights in case of payment of an amount in excess of the limits of the liability under the insurance policy vis-a-vis the insured?"

On a consideration of the avoidance clause of the policy and

Section II of the policy dealing with "Liability to Third Party", the

Supreme Court observed: (ACJ, P.3)

"A conjoint reading of all the terms of the policy of insurance executed in this case indicate that the total extent of liability of the insurance company is Rs.50,000/- but the company is liable to indemnify the insured against all sums including claimant‟s costs and expenses which insured becomes liable to pay and nothing in the policy affects the right of any person indemnified by the policy or any other person to recover an amount under or by virtue of the provisions of section 96 of the Act.

However, the insured is liable to repay to the company all sums paid by the company which the company would not have been liable to pay but for the condition of liability relating to third party."

13. In a recent decision of the Supreme Court in New India

Assurance Co. Ltd. vs. Vimal Devi and Ors., 2010 ACJ 2878 (SC),

where the Insurance Company filed an appeal before the Supreme

Court aggrieved by the High Court order directing the Insurance

Company to pay the entire compensation amount of ` 4,90,000/-

along with interest to the claimants and then to recover the amount

beyond its liability of ` 50,000/- from the owner of the vehicle

involved in the case, the Supreme Court dealt with the matter as

follows:

"3. Mr. K.L. Nandwani, learned Counsel appearing for the insurance company, submitted that the liability of the Appellant being limited to Rs. 50,000/-, the High Court was in error in making such a direction. In respect of the submission, he relied upon a Constitution Bench decision of this Court in New India Assurance Co. Ltd. v. C.M. Jaya and Ors. MANU/SC/0031/2002 : (2002) 2 SCC 278.

4. Mr. M.R. Calla, learned senior counsel appearing for the Respondent, in his reply submitted that the reliance placed on the Constitution Bench decision was misplaced and the Appellant overlooked the finer point of distinction made in the decision in C.M. Jaya. He submitted that in the case in hand, the High Court had noticed the Avoidance Clause in the policy which was in the following terms:

AVOIDANCE OF CERTAIN TERMS AND RIGHT OF RECOVERY.

Nothing in this Policy or any Endorsement hereon shall affect the right of any person indemnified by this policy or any other person to recover an amount under or by virtue of the provisions of the Motor Vehicle Act, 1939, Section 96.

But the Insured shall repay to the company all sums paid by the company which the company would not have been liable to pay but the said provisions.

5. The Avoidance Clause came up for consideration before a three Judges Bench of this Court in Amrit Lal Sood and Anr. v. Kaushalya Devi Thapar and

Ors. (1998) 3 SCC 744. In its decision in that case this Court observed:

13. In the policy in the present case also, there is a clause under the heading:

AVOIDANCE OF CERTAIN TERMS AND RIGHT OF RECOVERY" which reads thus:

Nothing in this policy or any endorsement hereon shall affect the right of any person indemnified by this policy or any other person to recover an amount under or by virtue of the provisions of the Motor Vehicles Act, 1939, Section 96. BUT the insured shall repay to the Company all sums paid by the Company which the Company would not have been liable to pay but for the said provisions.

14. The above clause does not enable the insurance company to resist or avoid the claim made by the claimant. The clause will arise for consideration only in a dispute between the insurer and the insured. The question whether under the said clause the insurer can claim repayment from the insured is left open. The circumstance that the owner of the vehicle did not file an appeal against the judgment of the Single Judge of the High Court under the letters patent may also be relevant in the event of a claim by the insurance company against the insured for repayment of the amount. We are not concerned with that question here.

15. In the result, we hold that the insurance company is also liable to meet the claim of the claimant and satisfy the award passed by the tribunal and modified by the High Court. The judgment of the High Court insofar as it

exonerates the insurance company (5th Respondent herein) from the liability, is set aside. The award passed by the Division Bench of the High Court can be enforced against the 5th Respondent also. The appeal is allowed to the extent indicated above. The parties will bear their respective costs.

6. Mr. Calla further submitted that in C.M. Jaya and Ors. a Constitution Bench of this Court indeed held that in a policy for limited liability it was not open to the Court to direct the insurance company to make any payment beyond the amount of the limited liability but it took note of the decision in Amrit Lal Sood with approval. He referred to paragraphs 10 and 16 of the judgment in C.M. Jaya where the decision in Amrit Lal Sood is noticed with approval.

7. The Avoidance Clause in the policy in this case makes all the difference and the direction of the High Court to the Appellant, insurance company to make payment of the full amount of compensation to the claimants and to recover its dues from the owner of the vehicle is directly in accordance with that Clause. In our view, the submission of Mr. Calla is well founded. The Appellant in this case can derive no benefit from the decision in C.M. Jaya.