Delhi High Court
Chandeswar Chaudhary & Ors. vs Vaij Nath Chaudhary & Ors. on 6 December, 2012
Author: G.P. Mittal
$ 9
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of decision: 6th December, 2012
+ MAC. APP. 596/2009
CHANDESWAR CHAUDHARY & ORS. ..... Appellants
Through: Mr. A.C. David with Mr. A.K.
Chaudhary, Advocates.
Versus
VAIJ NATH CHAUDHARY & ORS. ..... Respondents
Through: Mr.Ranjan Roy, Advocate for the
Respondent No.1.
Mr. Gulshan Kumar, Advocate for the
Respondent No.2.
Mr. Ram N. Sharma, Advocate for the
Respondent No.3 Insurance Company.
CORAM:
HON'BLE MR. JUSTICE G.P.MITTAL
JUDGMENT
G. P. MITTAL, J. (ORAL)
1. The Appeal is directed against a judgment dated 19.09.2009 passed by
the Motor Accident Claims Tribunal(the Claims Tribunal) whereby in a
Petition under Section 163-A of the Motor Vehicles Act, 1988(the Act) a
compensation of `2,60,500/- was awarded for the death of Sanjeev
Kumar, a bachelor aged 15½ years who was working as a helper with a
private company.
2. During inquiry before the Claims Tribunal, it was claimed that deceased
was earning `3,000/- per month. The Claims Tribunal, however, held
that the compensation can be awarded on the minimum wages of an
unskilled worker which was `2,000/- per month on the date of the
accident. The Claims Tribunal thus deducted 1/3rd towards personal and
living expenses and applied a multiplier of 16 to compute the loss of
dependency as `2,56,000/-. The Claims Tribunal further awarded a sum
of `2,000/- towards funeral expenses `2,500/- towards loss to estate. The
Claims Tribunal further found that the driving licence held by the driver
(Respondent No.3) had expired on 03.05.2002; this accident took place
on 11.07.2002 and the licence was renewed much thereafter on
26.12.2003. Thus, the Claims Tribunal opined that since the driver did
not hold a valid driving licence, the Insurance Company was not liable to
pay the compensation awarded. It, therefore, exonerated the Insurance
Company and made the driver and the owner liable to pay the
compensation.
3. There is twin challenge to the judgment. First, the compensation should
have been awarded at least on the basis of minimum wages of an
unskilled worker of `2,667/-. Secondly, even if there was breach of the
terms and conditions of the policy, the Insurance Company was under
obligation to perform its statutory liability vis-à-vis the third party. Thus,
the Insurance Company should have been asked to pay the compensation
and granted recovery rights if there was breach of the terms and
conditions of the policy.
4. On the other hand, the learned counsel for the Respondents No.1 and 2
supports the award on the ground that the compensation awarded is just
and reasonable. The learned counsel for the Respondent No.3 contends
that since the breach of the terms and conditions of the policy was
proved, the Insurance Company was rightly exonerated.
5. The Appeal must succeed on both the grounds.
6. Deceased Sanjeev Kumar was an adolescent and was, therefore, entitled
to work in non-hazardous work place. In fact, the Claims Tribunal
awarded compensation on the basis of minimum wages as fixed by the
Government of NCT of Delhi which was taken as `2,000/- per month
instead of `2,667/- per month. Therefore, taking the minimum wages as
`2,667/-, the loss of dependency comes to `3,41,376/- (`2,667/- x 12 x
2/3 x 16).
7. As far as liability is concerned, it is established that the licence was got
renewed much after a period of 30 days. As per proviso to Section
14(2)(b), the licence remains effective for a period of 30 days from the
date of expiry. The extended period of 30 days came to an end on
21.06.2002. The licence was renewed only on 26.12.2003. As per
Section 15 if the licence is not renewed within 30 days from the date of
expiry , its validity will be effective from the date of its renewal. Thus,
practically the First Respondent was without a driving licence for the
period 04.05.2002 to 25.12.2003.
8. Section 3 prohibits a person to drive a motor vehicle in any public place
unless he holds "an effective driving licence issued to him authorizing
him to drive the vehicle." On the other hand, Section 149 (2) (a) (ii) lays
down that the Insurance Company is permitted to defend an award given
by the Claims Tribunal if there has been a breach to satisfy condition of
policy and one of such condition is "a condition excluding driving by a
named person or persons or by any person who is not duly licensed".
9. In National Insurance Company Limited v. Jarnail Singh & Ors., (2007)
15 SCC 28 and in New India Assurance Company Ltd. v. Suresh Chandra
Aggarwal, (2009) 15 SCC 761, the Supreme Court held that if the driving
licence is renewed after a period of 30 days of the expiry of the driving
licence, it would be effective only from the date of its renewal and the
driver of the vehicle shall be deemed to be without a driving licence in
the interregnum and the Insured would be guilty of breach of the
condition of policy as envisaged under Section 149 (2) (a) (ii) of the Act.
10. Thus, the Insurance Company duly proved the breach of the terms and
conditions of the policy. Otherwise also, the finding on breach of the
terms and conditions is not challenged by the Respondents No.1 and 2(the
driver and owner). Thus, the Respondent No.3 Insurance Company can
avoid the liability of the insured except to satisfy its statutory liability.
11. The issue of satisfying the third party liability even in case of breach of
the terms of insurance policy is settled by three Judge Bench report in
Sohan Lal Passi v. P. Sesh Reddy, (1996) 5 SCC 21. As per Section
149(2) of the Motor Vehicles Act (the Act), an insurer is entitled to
defend the action on the grounds as mentioned under Section
149(2)(a)(i)(ii) of the Act. Thus, the onus is on the insurer to prove that
there is breach of the condition of the policy. It is well settled that the
breach must be conscious and willful. Even if a conscious breach on the
part of the insured is established, still the insurer has a statutory liability
to pay the compensation to the third party and will simply have the right
to recover the same from the insured/tortfeasor either in the same
proceedings or by an independent proceedings as the case may be, as
ordered by the Claims Tribunal or the Court. The question of statutory
liability to pay the compensation was discussed in detail by a two Judge
Bench of the Supreme Court in Skandia Insurance Company Limited v.
Kokilaben Chandravadan, (1987) 2 SCC 654 where it was held that
exclusion clause in the contract of Insurance must be read down being in
conflict with the main statutory provision enacted for protection of victim
of accidents. It was laid down that the victim would be entitled to
recover the compensation from the insurer irrespective of the breach of
the condition of policy. The three Judge Bench of the Supreme Court in
Sohan Lal Passi analyzed the corresponding provisions under the Motor
Vehicles Act, 1939 and the Motor Vehicles Act, 1988 and approved the
decision in Skandia. In New India Assurance Co., Shimla v. Kamla and
Ors., (2001) 4 SCC 342, the Supreme Court referred to the decision of the
two Judge Bench in Skandia, the three Judge Bench decision in Sohan
Lal Passi and held that the insurer who has been made liable to pay the
compensation to third parties on account of issuance of certificate of
insurance, shall be entitled to recover the same if there was any breach of
the policy condition on account of the vehicle being driven without a
valid driving licence. The relevant portion of the report is extracted
hereunder:
"21. A reading of the proviso to sub-section (4) as well as the
language employed in sub-section (5) would indicate that they are
intended to safeguard the interest of an insurer who otherwise has
no liability to pay any amount to the insured but for the provisions
contained in Chapter XI of the Act. This means, the insurer has to
pay to the third parties only on account of the fact that a policy of
insurance has been issued in respect of the vehicle, but the insurer
is entitled to recover any such sum from the insured if the insurer
were not otherwise liable to pay such sum to the insured by virtue
of the conditions of the contract of insurance indicated by the
policy.
22.To repeat, the effect of the above provisions is this: when a
valid insurance policy has been issued in respect of a vehicle as
evidenced by a certificate of insurance the burden is on the insurer
to pay to the third parties, whether or not there has been any
breach or violation of the policy conditions. But the amount so
paid by the insurer to third parties can be allowed to be recovered
from the insured if as per the policy conditions the insurer had no
liability to pay such sum to the insured.
23.It is advantageous to refer to a two-Judge Bench of this Court
in Skandia Insurance Company Limited v. Kokilaben
Chandravadan, (1987) 2 SCC 654. Though the said decision
related to the corresponding provisions of the predecessor Act
(Motor Vehicles Act, 1939) the observations made in the judgment
are quite germane now as the corresponding provisions are
materially the same as in the Act. Learned Judge pointed out that
the insistence of the legislature that a motor vehicle can be used in
a public place only if that vehicle is covered by a policy of
insurance is not for the purpose of promoting the business of the
insurance company but to protect the members of the community
who become suffers on account of accidents arising from the use of
motor vehicles. It is pointed out in the decision that such
protection would have remained only a paper protection if the
compensation awarded by the courts were not recoverable by the
victims (or dependants of the victims) of the accident. This is the
raison d'etre for the legislature making it prohibitory for motor
vehicles being used in public places without covering third-party
risks by a policy of insurance.
24.The principle laid down in the said decision has been followed
by a three-Judge Bench of this Court with approval in Sohan Lal
Passi v. P. Sesh Reddy, (1996) 5 SCC 21.
25.The position can be summed up thus:
The insurer and the insured are bound by the conditions
enumerated in the policy and the insurer is not liable to the insured
if there is violation of any policy condition. But the insurer who is
made statutorily liable to pay compensation to third parties on
account of the certificate of insurance issued shall be entitled to
recover from the insured the amount paid to the third parties, if
there was any breach of policy conditions on account of the vehicle
being driven without a valid driving licence........."
12. Again in United India Insurance Company Ltd. v. Lehru & Ors., (2003) 3
SCC 338, in para 18 of the report the Supreme Court referred to the
decision in Skandia, Sohan Lal Passi and Kamla and held that even
where it is proved that there was a conscious or willful breach as
provided under Section 149(2)(a) (ii) of the Motor Vehicle Act, the
Insurance Company would still remain liable to the innocent third party
but may recover the compensation paid from the insured. The relevant
portion of the report is extracted hereunder:
"18. Now let us consider Section 149(2). Reliance has been
placed on Section 149(2)(a)(ii). As seen, in order to avoid liability
under this provision it must be shown that there is a "breach". As
held in Skandia and Sohan Lal Passi cases the breach must be on
the part of the insured. We are in full agreement with that. To
hold otherwise would lead to absurd results. Just to take an
example, suppose a vehicle is stolen. Whilst it is being driven by
the thief there is an accident. The thief is caught and it is
ascertained that he had no licence. Can the insurance company
disown liability? The answer has to be an emphatic "No". To
hold otherwise would be to negate the very purpose of compulsory
insurance.........."
xxxx xxxx xxxx xxxx xxxx
xxxx xxxx xxxx xxxx xxxx
20...........If it ultimately turns out that the licence was fake, the
insurance company would continue to remain liable unless they
prove that the owner/insured was aware or had noticed that the
licence was fake and still permitted that person to drive. More
importantly, even in such a case the insurance company would
remain liable to the innocent third party, but it may be able to
recover from the insured. This is the law which has been laid
down in Skandia, Sohan Lal Passi and Kamla cases. We are in full
agreement with the views expressed therein and see no reason to
take a different view."
13. The three Judge Bench of the Supreme Court in National Insurance
Company Limited v. Swaran Singh & Ors., (2004) 3 SCC 297 again
emphasized that the liability of the insurer to satisfy the decree passed in
favour of the third party was statutory. It approved the decision in Sohan
Lal Passi, Kamla and Lehru. Paras 73 and 105 of the report are
extracted hereunder:
"73. The liability of the insurer is a statutory one. The liability of
the insurer to satisfy the decree passed in favour of a third party is
also statutory.
xxxx xxxx xxxx xxxx xxxx
xxxx xxxx xxxx xxxx xxxx
105. Apart from the reasons stated hereinbefore, the doctrine of
stare decisis persuades us not to deviate from the said principle."
14. This Court in Oriental Insurance Company Limited v. Rakesh Kumar and
Others, 2012 ACJ 1268 and other Appeals decided by a common
judgment dated 29.02.2012, noticed some divergence of opinion in
National Insurance Company Limited v. Kusum Rai & Ors., (2006) 4
SCC 250, National Insurance Company Limited v. Vidhyadhar
Mahariwala & Ors., (2008) 12 SCC 701; Ishwar Chandra & Ors. v. The
Oriental Insurance Company Limited & Ors., (2007) 10 SCC 650 and
Premkumari & Ors. v. Prahalad Dev & Ors., (2008) 3 SCC 193 and held
that in view of the three Judge Bench decision in Sohan Lal Passi(supra)
and Swaran Singh, the liability of the Insurance Company vis-à-vis the
third party is statutory. If the Insurance Company successfully proves the
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.
15. Thus, the Respondent No.3 shall be bound to pay the compensation to the
Appellant but shall be entitled to recover the same from Respondent
No.1, the driver of the offending vehicle and Respondent No.2, being the
owner of the offending vehicle in execution of this very judgment without
having recourse to independent recovery proceedings.
16. In view of the above, the enhanced compensation of `85,376/- shall carry
interest @ 7.5% per annum from the date of filing of the Petition till its
payment. The enhanced amount shall be payable to the Appellants in
equal shares. 75% of the amount shall be held in fixed deposit for a
period of two years, rest shall be released on deposit.
17. The enhanced amount of `85,376/- along with interest shall be deposited
by the Respondent No.3 Insurance Company with the Claims Tribunal
within six weeks.
18. The Appeal is disposed of in above terms.
19. Pending Applications stand disposed of.
(G.P. MITTAL)
JUDGE
DECEMBER 06, 2012
pst
