Delhi High Court
Oriental Insurance Co. Ltd. vs Rekhaben & Ors. on 8 May, 2012
Author: G.P. Mittal
$~46
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of decision:8th May, 2012
+ MAC. APP. No.613/2009
ORIENTAL INSURANCE CO. LTD. ..... Appellant
Through: Mr. Pradeep Gaur with
Mr. Shashank Sharma,
Mr. Amit Gaur & Ms. Mauri
Gaur, Advocates
Versus
REKHABEN & ORS. ..... Respondents
Through: None
CORAM:
HON'BLE MR. JUSTICE G.P.MITTAL
JUDGMENT
G. P. MITTAL, J. (ORAL)
1. The Appellant Oriental Insurance Co. Ltd. impugns a judgment
dated 18.09.2009 whereby a compensation of `7,40,000/- was
awarded in favour of the Respondents No.1 to 3 for the death of
one Jagdishbhai Patel who died in a motor accident which
occurred on 06.06.2006.
2. On the basis of evidence adduced by the parties, the Claims
Tribunal held that the accident was caused on account of rash
and negligent driving of vehicle No. HR-55A-2277 by the
Respondent No.4 (Anil Poddar). The offending vehicle was
owned by Sanjay Saini(Respondent No.5) and was insured with
the Appellant Insurance Company.
3. During hearing of the Appeal, the finding on negligence and
quantum of compensation is not disputed by the Appellant.
4. The sole ground urged on behalf of the Appellant Insurance
Company is that the Appellant successfully proved the breach
of the terms of policy as envisaged under Section 149(2)(a)(i)(c)
of the Motor Vehicles Act i.e. the vehicle being a transport
vehicle was being driven without a permit. In spite of this, the
Appellant Insurance Company was made liable to pay the
compensation and even the recovery rights were declined.
5. It was proved on record that a notice under Order XII Rule 8
CPC was served upon the owner who failed to produce the
permit in the Court as required in the notice. As per Section
149(2)(a), an insurer is entitled to defend the action on the
grounds as mentioned under Section 149(2)(a)(i) 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
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 v. P. Sesh Reddy, (1996) 5 SCC 21
analyzed the corresponding provision under the Motor Vehicles
Act, 1939 and the Motor Vehicles Act, 1988 and approved the
decision in Skandia (supra). 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(supra), the three Judge Bench decision in Sohan Lal
Passi(supra) and held that the insurer who has been made liable
to pay the compensation to third parties on account of certificate
of insurance issued, 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........."
6. 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(supra), Sohan Lal
Passi(supra) and Kamla(supra) 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."
7. 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 (supra),
Kamla (supra) and Lehru (supra). Para 73, 103 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."
8. This Court in MAC APP. No.329/2010 Oriental Insurance
Company Limited v. Rakesh Kumar and Others 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(supra), 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.
9. Turning to the instant case, the Appellant's plea is that, a notice
under Order XII Rule 8 CPC was duly served upon the owner
requiring him to produce the permit to show that the vehicle in
question was being driven for a purpose as stipulated in the
permit. The owner (Respondent No.5) failed to produce the
permit and, therefore, an inference ought to have been drawn
against the Respondent No.5 that the vehicle was being used in
violation of the purpose stipulated in the permit.
10. I would not agree with the contention raised on behalf of the
Appellant. The service of notice under Order XII Rule 8 CPC
simply entitled the Insurance Company to lead secondary
evidence in respect of the document sought to be produced. In
case of a driving licence when the driving licence is not
produced, the Insurance Company cannot know the place
wherefrom the driver might have obtained a driving licence. In
case of a permit, the Insurance Company is always aware of the
name of the transport authority where the insured vehicle is
registered. It can summon the record from the concerned
transport authority to prove the breach of the condition of the
policy for using a vehicle without permit or for a purpose not
allowed by the permit. The Appellant Insurance Company did
not make any effort to summon the record from the concerned
transport authority to prove that the vehicle was being plied for
a purpose other than the one specified in the permit issued by
the concerned transport authority. The Appellant, therefore,
failed to establish any breach of the terms of the policy to avoid
liability to indemnify the insured.
11. The Appeal is devoid of any merit; the same is accordingly
dismissed.
12. The statutory amount of `25,000/- shall be refunded to the
Appellant Insurance Company.
(G.P. MITTAL)
JUDGE
MAY 08, 2012
pst
