Delhi High Court
National Insurance Co. Ltd. vs Prem Sukh Kashyap & Ors. on 15 February, 2012
Author: G.P. Mittal
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of decision: 15th February, 2012
+ MAC.APP. 499/2009
NATIONAL INSURANCE CO. LTD. ..... Appellant
Through: Mr. Manoj Ranjan Sinha,
Advocate
versus
PREM SUKH KASHYAP & ORS. ..... Respondents
Through: Mr. S.K. Vashisth, Advocate
for R-1 & R-2.
CORAM:
HON'BLE MR. JUSTICE G.P.MITTAL
JUDGMENT
G. P. MITTAL, J. (ORAL)
1. The Appellant National Insurance Company Limited impugns
the judgment dated 04.07.2009 whereby a compensation of `
3,56,539/- along with interest @ 7% per annum was granted in
favour of Respondents No.1 & 2.
2. The only ground of challenge is that Ijjajuddin Respondent
No.3 was holding a licence to drive a motor cycle and motor
car. He did not possess any licence to drive a transport vehicle
i.e. Tata 407 bearing No.DL-1LG-1849 involved in the accident
and thus, the Insurance Company had no liability to pay at all.
3. By the impugned judgment, the Motor Accident Claims
Tribunal (the Claims Tribunal) held that the Appellant
Insurance Company was able to prove the breach of the terms of
the policy, yet, fastened the liability on the Insurance Company
to pay the compensation awarded in the first instance and then
to recover the same. In view of the three Judges Bench decision
of the Supreme Court in National Insurance Co. Ltd. v.
Swaran Singh & Ors., 2004 (3) SCC 297, it is settled that
in case of a third party claim, the Insurance Company had
statutory liability to satisfy the judgment in the first instance
and then to recover the same from the owner and the driver. In
Swaran Singh (supra), it was held as under:-
"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.
x x x x x x x
77. In United Insurance Co. Ltd. v. Jaimy and Ors. 1998
ACJ 1318 (Ker.) it is stated:-
"Section 149(2) relates to the liability of the
insurer and speaks of a situation in regard to
which no sum shall be payable by an insurer in
respect of any judgment or award. In the context
it is proved that an insurer to whom notice of
bringing of any such proceeding is given, could
defend the action stated in the said statutory
provision. The contention in the context would be
found in section 149(2)(a) in the event of a
breach of a specified condition of the policy
enabling the insurer to avoid liability in regard
thereto. In the process in regard to the right of
the insurer to recover the amount from the
insured, it would have to be seen by referring to
section 149(4) as to under what circumstances
this can be successfully recovered from the
insured.
Section 149(4) says that where a certificate of
insurance is issued, so much of the said policy as
purports to restrict the insurance of the persons
insured thereby by referring to any of the
conditions mentioned and it is precisely enacted
in regard thereto that the liability covered by
Section 2(b) as is required to be covered by the
policy would not be available. The position is
made further clear by the provisions enacting
that any sum paid by the insurer in or towards
the discharge of any liability of any person who
is covered by the policy by virtue of this sub-
section shall be recoverable by the insurer from
that person.
In other words, section 149(4) considers the right
of the insurance company in regard to re-
imbursement of the amount paid by them only in
the context of a situation other than the one
contemplated under Section 149(2)(b). It would
mean that except under the situation provided by
Section 149(2)(b), the insurer would not be in a
position to avoid the liability because he has got
rights against the owner under the above
provision.
The learned counsel strenuously submitted that
this would not be the correct understanding and
interpretation of the statutory provisions of
section 149 of the 1988 Act. The learned counsel
submitted that to read the statutory provision to
understand that the insurance company could
only claim from the owner in situations governed
by section 149(2)(b) and to have no right under
the said provision with regard to other situations
under section 149(2)(a) would not be the proper
reading of the statutory provision. The learned
counsel submitted that in fact the provision
would have to be meaningfully understood. It is
not possible to consider the submission of the
learned counsel in the light of the plain language
of the statutory provision. It is necessary to
emphasise that under the new Act the burden of
the insurance company has been made heavier in
the context of controlling the need of taking up
contentions to legally avoid the liabilities of the
insurance company."
x x x x x x x
83. 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
mean that it did not have initial liability at all Thus, if the
insurance company is made liable to pay any amount, it
can recover the entire amount paid to the third party on
behalf of the assured. If this interpretation is not given to
the beneficent provisions of the Act having regard to its
purport and object, we fail to see a situation where
beneficent provisions can be given effect to. Sub-section
(7) of Section 149 of the Act, to which pointed attention
of the Court has been drawn by the learned counsel for
the petitioner, which is in negative language may now be
noticed. The said provision must be read with Sub-
section (1) thereof. The right to avoid liability in terms of
Sub-section (2) of Section 149 is restricted as has been
discussed hereinbefore. It is one thing to say that the
insurance companies are entitled to raise a defence but it
is another thing to say that despite the fact that its
defence has been accepted having regard to the facts and
circumstances of the case, the 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.
x x x x x x x
104. It is, therefore, evident from the discussions made
hereinbefore that the liability of the insurance company
to satisfy the decree at the first instance and to recover
the awarded amount from the owner or driver thereof has
been holding the field for a long time."
4. In United India Insurance Company Ltd. v. Lehru & Ors.,
(2003) 3 SCC 338; which was noted in Swaran Singh (Supra) it
was held that even in the case where a willful breach on the part
of the insured is established, the Insurance Company would
remain liable to the third parties. But, it may be able to recover
the amount paid from the insured. Para 20 of the report is
extracted hereunder:-
"20. When an owner is hiring a driver he will therefore
have to check whether the driver was a driving licence. If
the driver produces a driving licence which on the face of
it looks genuine, the owner is not expected to find out
whether the licence has in fact been issued by a
competent authority or not. The owner should then take
the test of the driver. If he finds that the driver is
competent to drive the vehicle, he will hire the driver. We
find it rather strange that Insurance Companies expect
owners to make enquiries with RTOs, which are spread
all over the country, whether the driving licence shown to
them is valid or not. Thus where the owner has satisfied
himself that the driver has a licence and is driving
competently there would be no breach of Section 149 (2)
(a) (ii). The Insurance Company would not then be above
of liability. 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 notice 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 Insurance Company Limited v.
Kokilaben Chandravadan ,(1987) 2 SCC 654; Sohan Lal
Passi v. P. Sesh Reddy, (1996) 5 SCC 21; and New India
Assurance Company Ltd. v. Kamla, (2001) 4 SCC 342.
We are in full agreement with the views expressed therein
and see no reason to take a different view." (underlines
are mine)
5. Similar view was taken in New India Assurance Co., Shimla v.
Kamla and Ors., (2001) 4 SCC 342, Oriental Insurance Co. Ltd.
v. Zaharulnisha and Ors., (2008) 12 SCC 385, National
Insurance Company Limited v. Geeta Bhat & Ors., 2008 (12)
SCC 426, and National Insurance Company Limited v. Laxmi
Narain Dhut, (2007) 3 SCC 700.
6. In National Insurance Company Limited v. Kusum Rai & Ors.
(2006) 4 SCC 250, the Supreme Court held that the Appellant
Insurance Company was not liable to pay the compensation as
the driver did not possess a valid driving licence, yet exercising
its jurisdiction under Article 136 of the Constitution of India, it
directed the Appellant Insurance Company to pay the
compensation and recover the amount from the owner of the
vehicle.
7. In view of the authoritative pronouncement in Swaran Singh
(supra) which is a three Judges Bench decision, the Insurance
Company was liable to pay and recover the awarded amount
from the owner of the offending vehicle.
8. No interference is called for in the impugned judgment. The
Appeal is dismissed being devoid of any merit.
9. Statutory amount of `25,000/- deposited by the Appellant
Insurance Company may be refunded to it through its counsel.
10. The amount deposited by the Insurance Company shall be
disbursed to the Respondents No.1 & 2 in terms of the
impugned award.
(G.P. MITTAL)
JUDGE
FEBRUARY 15, 2012
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