Delhi High Court

National Insurance Co. Ltd. vs Geeta & Ors on 30 March, 2012

Author: J.R. Midha

R-49 (Part-I)
*      IN THE HIGH COURT OF DELHI AT NEW DELHI

+     MAC.APP.No.994/2006 and CM No.2300/2008

%                               Reserve on : 7th March, 2012
                               Date of decision : 30th March, 2012

      NATIONAL INSURANCE CO. LTD.        ...... Appellant
                    Through : Ms. Manjusha Wadhwa, Adv.

                      versus

      GEETA & ORS                               ..... Respondents
                           Through : None.

CORAM :-
THE HON'BLE MR. JUSTICE J.R. MIDHA

                               JUDGMENT

1. The appellant has challenged the award of the Claims

Tribunal whereby compensation of `5,04,000/- has been

awarded to the claimants.

2. The accident dated 18th June, 1999 resulted in the death

of Jagdish. The deceased was survived by his widow, minor son

and parents who filed the claim petition before the Claims

Tribunal. The deceased was aged 25 years and self-employed

at the time of accident. However, in the absence of any

documentary proof of income, the Claims Tribunal took the

minimum wages of `2,348/- into consideration, added 50%

towards inflation, deducted 1/3rd towards personal expenses

and applied the multiplier of 17 to compute the loss of

dependency at `4,78,992/-. `20,000/- has been awarded

towards loss of love, affection and consortium and `5,000/-

towards funeral expenses. The total compensation awarded is

`5,03,992/- along with interest @7% per annum.

3. The learned counsel for the appellant has urged the

following grounds at the time of hearing of this appeal:-

(i) The offending vehicle was being used for carrying

passengers in violation of the registered use and the driver of

the offending vehicle was holding the driving licence to drive

the Light Motor Vehicles whereas the offending vehicle was

being used for commercial purpose at the time of the accident,

and, therefore, the appellant is not liable.

(ii) The increase in minimum wages due to inflation should

not be taken into consideration.

4. The deceased Jagdish was aged 25 years at the time of

the accident and was self employed as an Agarbatti Seller. The

father of the deceased appeared in the witness box as PW-1

and deposed that the deceased was earning Rs.4,000/- per

month. However, in the absence of any documentary proof of

income, the Claims Tribunal took the minimum wages of

Rs.2,348/- into consideration, added 50% towards inflation and

rise in price index to compute the income of the deceased.

There is no infirmity in the computation of income of the

deceased. The Claims Tribunal has deducted 1/3rd towards

personal expenses of the deceased whereas the appropriate

deduction in accordance with the judgment of Supreme Court

in Sarla Verma v. Delhi Transport Corporation, 2009 (6)

Scale 129 is 1/4th. The Claims Tribunal has awarded interest

@7% per annum whereas the appropriate interest is 9% per

annum in terms of the judgment Municipal Corporation of

Delhi v. Association of Victims of Uphaar Tragedy &

Ors., AIR 2012 SC 100. The award of the Claims Tribunal

warrants enhancement on the above two grounds. However,

since there is no appearance on behalf of the respondents and

that the respondents have also not filed any cross-objections,

the quantum of compensation awarded by the Claims Tribunal

is not being interfered with.

5. The Claims Tribunal has given the recovery rights to the

appellant on the ground that the offending vehicle was being

used for commercial purposes in violation of the policy. The

Claims Tribunal has relied upon the statement of RW-3,

Administrative Officer of the appellant who deposed on oath

that the appellant is entitled to the recovery rights on account

of violation of the policy as to its use. With respect to the

driving licence, it is submitted by learned counsel for the

appellant that the driver of the offending vehicle was holding a

driving licence to drive LMV whereas the offending vehicle was

being used for the commercial purpose at the time of the

accident and the finding of the Claims Tribunal is based on the

recovery rights claimed by the appellant.

6. The appellant's contention that the Tribunal after

concluding that there was violation of registered use of the

vehicle involved in accident ought not to have asked the

appellant to pay compensation and recover it from the owner,

does not sound convincing. In order to provide immediate relief

to the claimants, the Tribunal, even, where it finds that the

insurer may escape the liability to pay the compensation, may

ask the Insurance Company to pay compensation to the

claimant and ask it to recover the compensation so paid from

the insured. This practice has been consistently followed by

the Motor Accident Claims Tribunals and even approved by the

Supreme Court. If after a long drawn trial, the claimant is found

entitled to compensation but not in a position to reap the fruits

and forced to initiate proceedings against the owner of the

offending vehicle and/or its driver, the very object of the Motor

Vehicles Act would be frustrated.

7. In National Insurance Co. Ltd. v. Swaran Singh,

2004 (3) SCC 297, the three Judges Bench of the Apex Court

held that in case of a third party claim, the insurance company

has the statutory liability to satisfy the judgment in the first

instance and then to recover the same from the owner and

driver. The findings of the Apex Court are as under:-

"73. The liability of the insurer is a statutory one. The liability of the insurer to satisfy the decree passed in favor of a third party is also statutory. xxx

77. In United Insurance Co. Ltd. v. Jaimy and Ors. 1998 ACJ 1318 (Ker.) it is stated: (ACJ pp.1324- 25, paras 19-22)

"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 emphasize 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."

(Emphasis supplied)

xxx

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 defense but it is another thing to say that despite the fact that its defense 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.

xxx

Conclusion

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."

8. 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. The

relevant findings of the Supreme Court are reproduced

hereunder:-

"20. When an owner is hiring a driver he will therefore have to check whether the driver was a driving license. If the driver produces a driving license which on the face of it looks genuine, the owner is not expected to find out whether the license 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 license shown to them is valid or not. Thus where the owner has satisfied himself that the driver has a license 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 license was fake, the Insurance Company would continue to remain liable unless they prove that the owner/insured was aware or had notice that the license 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."

(Emphasis supplied)

9. Similar view was taken in New India Assurance Co.,

Shimla v. Kamla, (2001) 4 SCC 342, Oriental Insurance

Co. Ltd. v. Zaharulnisha, (2008) 12 SCC 385, National

Insurance Company Limited v. Geeta Bhat, (2008) 12

SCC 426, and National Insurance Company Limited v.

Laxmi Narain Dhut, (2007) 3 SCC 700.

10. In National Insurance Company Limited v. Kusum

Rai, (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

license, 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.

11. In Kusum Lata v. Satveer, (2011) 3 SCC 646, the

Apex Court has again put seal of approval on the principles laid

down in Swaran Singh (supra). The Supreme Court has

observed as under:-

"13. In respect of the dispute about licence, the Tribunal has held and, in our view rightly, that the Insurance Company has to pay and then may recover it from the owner of the vehicle. This Court is affirming that direction in view of the principles laid down by a three judge Bench of this Court in the case of National Insurance Company Limited v. Swaran Singh and ors reported in (2004) 3 SCC 297".

12. In view of the above discussion, this Court is of the

opinion that the Claims Tribunal did not commit any illegality in

directing the appellant to make deposit of the amount of

compensation, and recover the same from the insured person,

i.e, the owner and driver of the offending vehicle.

13. Respondents No.3 and 4 have filed an application bearing

CM No.2300/2008 seeking modification of the shares of the

claimants on the ground that the widow of the deceased has

remarried. The shares of the claimants in the award are as

under:-

Respondent No.1 (widow) - Rs.2,00,000/- Respondent No.2 (minor son) - Rs.2,00,000/- Respondent Nos.3 (father) - Rs.1,04,000/- and 4 (mother)

14. In view of the remarriage of the widow, the shares of the

claimants in the award amount are modified to the following

extent:-

Share of respondent No.2 - Rs.1,50,000/- + (minor son) proportionate interest

Share of respondent No.1 - Rs.1,50,000/- + (widow) proportionate interest

Share of respondent No.3 - Rs.1,02,000/- + (father) proportionate interest

Share of respondent No.4 - Rs.1,02,000/- + (mother) proportionate interest

15. For the aforesaid reasons, the appeal is disposed of on

the above terms. However, the award is modified to the

extent of the shares of the claimants as mentioned above. The

appellant has deposited the entire award amount with the

Claims Tribunal, out of which some amount has been released

to the claimants in terms of the order of this Court and the

remaining amount is lying with the Claims Tribunal.

16. The Claims Tribunal is directed to release the award

amount to the claimants in terms of this judgment. The Claims

Tribunal shall issue appropriate directions to the bank in which

the amount is lying in fixed deposit to release the amount to

the claimants in terms of this judgment.