Delhi High Court
New India Assurance Co. Ltd. vs Deepika & Ors on 16 May, 2012
Author: G.P. Mittal
$~37
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of decision:16th May, 2012
+ MAC. APP. No.159/2012 & CM. APPL No.9054/2012
NEW INDIA ASSURANCE CO. LTD. ..... Appellant
Through: Mr.Sameer Nandwani,
Advocate
Versus
DEEPIKA & ORS ..... Respondents
Through: Mr. S.N. Parashar, Advocate
CORAM:
HON'BLE MR. JUSTICE G.P.MITTAL
JUDGMENT
G. P. MITTAL, J. (ORAL)
1. The file is taken up today as an application (CM. APPL
No.9054/2012) has been moved by the Respondents No.1 to 3
for withdrawal of the amount. However, the learned counsel for
the parties submit that it is a short matter and the Appeal can be
disposed of today itself. The Appeal is thus taken for final
disposal.
2. The Appellant New India Assurance Co. Ltd. impugns a
judgment dated 20.10.2011 whereby a compensation of
`29,31,900/- was awarded in favour of the Respondents No.1 to
3 for the death of Golty Saluja who died in an accident which
occurred on 24.02.2011.
3. The main grounds taken up by the Appellant are that since the
driver did not possess the licence for LMV(transport) and he
possessed a licence to drive only a motorcycle, jeep, car etc., he
was not entitled to drive the vehicle involved in the accident. It
is urged that the Appellant Insurance Company was entitled to
be exonerated and the recovery rights can only be granted by
the Supreme Court in its power under Article 142 of the
Constitution of India.
4. The Appeal filed by the Appellant on these grounds is mis-
conceived. The issue of satisfying the third party liability even
in a case of breach of the terms of insurance policy is settled by
the three Judge Bench report in Sohan Lal Passi v. P. Sesh
Reddy, (1996) 5 SCC 21 and National Insurance Company
Limited v. Swaran Singh & Ors., (2004) 3 SCC 297. 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 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(supra) 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........."
5. 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."
6. 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). Paras 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."
7. 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.
8. Right from Skandia(supra), Sohan Lal Passi(supra), Lehru
(supra) and Swaran Singh (supra), the recovery rights were not
granted by the Supreme Court under Article 142 of the
Constitution of India, rather it was stated that the liability of the
Insurance Company to satisfy the award was statutory even in
case of breach of the terms of the policy by the insured.
9. In view of this, the Appeal is accordingly dismissed with costs
of `10,000/- to be deposited by the Appellant Insurance
Company with the Registrar General which shall be payable to
the Respondents No.1 to 3 (Claimants) through their counsel.
10. The amount of compensation deposited shall be released in
favour of the Respondents No.1 to 3 in terms of the order
passed by the Claims Tribunal.
11. Pending application, if any, stands disposed of.
12. The statutory amount of `25,000/- shall be refunded to the
Appellant Insurance Company on payment of costs to
Respondents No.1 to 3.
13. The next date of hearing 13.08.2012 fixed hereby is cancelled.
(G.P. MITTAL)
JUDGE
MAY 16, 2012
pst
