Delhi High Court
Oriental Insurance Co. Ltd vs Mamta Kumari & Ors on 6 September, 2012
Author: G.P. Mittal
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: 30th August, 2012
Pronounced on: 6th September, 2012
+ MAC APP.629/2010
ORIENTAL INSURANCE CO. LTD. ..... Appellant
Through: Ms. Manjusha Wadhwa, Advocate
Versus
MAMTA KUMARI & ORS ..... Respondents
Through: Mr.Vijay Wadhwa, Advocate for the
Respondent No.1.
Mr. Ranvir Vats, Advocate for the
Respondent No.3.
CORAM:
HON'BLE MR. JUSTICE G.P.MITTAL
JUDGMENT
G. P. MITTAL, J.
1. This Appeal is directed against a judgment dated 23.07.2010 passed by
the Motor Accident Claims Tribunal (Claims Tribunal) whereby a
compensation of `10,27,636/- was awarded in favour of Mamta Kumari,
the First Respondent for having suffered injuries in a motor vehicle
accident which occurred on 02.06.2008.
2. As per the averments made in the Claim Petition on 02.06.2008 at about
10:30 pm the First Respondent along with other persons was proceeding
to Baba Vadbhag Singh Mandir, Mairi, Una (H.P.) for holy darshan in
Tata Qualis No.DL-5C-B-4690. The Qualis was being driven by the
Respondent Ravi Kant in a rash and negligent manner. On account of
rash and negligent driving, the Qualis struck against a pavement,
overturned and fell into a pit, as a result of which the occupants of Qualis
including the First Respondent suffered injuries.
3. The injuries in the case of the First Respondent were very serious; she
suffered severe head injuries (multiple haemorrhagic contusions), injuries
on the face, fracture on left hand and abrasions all over her body. She
was immediately removed to Civil Hospital, Roop Nagar (Punjab) which
was close to the place of accident. Since adequate treatment was not
available in the Civil Hospital, she was shifted to PGI Chandigarh on the
same day. The First Respondent went into coma and was, therefore,
admitted in NINS Brain and Spine Hospital, Sector 34, Chandigarh on
04.06.2008 where subclavian cannulation was done and she was put on
ventilator. On 07.06.2008, tracheostomy was done; on 08.06.2008 the
MRI taken revealed that there were multiple haemorrhagic contusions.
She (the First Respondent) was again put on ventilator and was
discharged on 11.07.2008 with advice to be on semi solid diet and to take
physiotherapy as her left portion was still paralyzed. The First
Respondent was issued a disability certificate Ex.P1/70( Ex.PW2/A) to
the effect that she was a case of quadriparesis and her physical disability
was 75% in respect of her whole body.
4. In the Claim Petition, it was averred that she was a student of B.Com.
final year and could not pursue her studies on account of injuries
suffered. During evidence, it was brought on record that she had
completed her B.Com. final year. The First Respondent claimed that
there was an expenditure of `3,50,000/- on her treatment; she had to take
a special diet and physiotherapy; there was expenditure on conveyance;
she had to engage an attendant and was unable to work at all on account
of the permanent disability. The Claims Tribunal, as stated earlier,
awarded a compensation of `10,27,636/-, which is tabulated hereunder:
Sl.No. Compensation under various heads Awarded by the
Claims Tribunal
1. Medicines and Medical Treatment `2,25,507/-
2. Loss of Earning Capacity due to ` 6,72,129/-
Disability
3. Pain and Suffering ` 50,000/-
4. Loss of Marriage Prospects ` 50,000/-
5. Conveyance, Special Diet and Attendant ` 30,000/-
Total ` 10,27,636/-
5. The finding on negligence is not challenged by the Appellant Insurance
Company. The driver and the owner of Tata Qualis have not filed any
Appeal, thus the finding on negligence has attained finality.
6. There is twin challenge to the impugned judgment. First, that the
compensation awarded towards loss of earning capacity is on the higher
side, and second that the Tata Sumo No.DL-5C-B-4690 was being used
for hire and reward, yet instead of exonerating the Appellant Insurance
Company of its liability to pay the compensation, it was made liable to
pay the compensation with a right to recover the same from Respondents
No.2 and 3.
7. The finding with regard to the breach in the terms of the policy reached
by the Claims Tribunal and granting of recovery rights against Second
and Third Respondent has also not been challenged by the owner and
driver. (Respondents No.2 and 3).
8. During inquiry before the Claims Tribunal, the First Respondent
examined Dr. Naresh Chandra (PW2), In-charge Orthopaedics, Guru
Gobind Singh Government Hospital, Raghubir Nagar, Delhi. He proved
the disability certificate Ex.PW1/70 declaring the First Respondent to be
permanently disabled to the extent of 75% in relation to her whole body.
He testified that due to this disability, the First Respondent would not be
able to do normal work, to move, to sit and get up independently and
climb the stairs without any assistance. The Claims Tribunal, apart from
awarding compensation towards treatment on proof of actual bills,
awarded a compensation of `50,000/- towards pain and suffering,
`50,000/- towards loss of marriage prospects. No compensation was
awarded towards disfigurement and loss of amenities in life. I was, prima
facie, of the view that the compensation awarded was inadequate and
niggardly keeping in view the injuries suffered and the condition of the
First Respondent. Therefore, I directed the parties to address their
argument as this appeared to be a case for enhancement of compensation.
9. It is urged by the learned counsel for the Appellant Insurance Company
that the First Respondent has not filed any Cross-Objections or Cross-
Appeal and, therefore, this Court is not empowered to enhance the
compensation. It is urged that the compensation awarded towards loss of
earning capacity to the extent of 100% is excessive as the First
Respondent had suffered disability of only 75%. It is contended that the
First Respondent was vacillating her stand in as much as that in the Claim
Petition it was averred that she was a student of B.Com. final year at the
time of the accident, whereas during evidence a case was set up that she
has completed her graduation in commerce.
10. Before dealing with the quantum of compensation, I would first advert to
the question whether there could be enhancement of compensation in a
Claim Petition under Section 166 of the Motor Vehicles Act, 1988 (the
Act) or in an Appeal filed by the driver/owner/Insurance Company
without filing any Cross-Objections?
11. Section 166 of the Motor Vehicles Act, 1988 (the Act) enjoins payment
of just compensation. In General Manager, Kerala Road Transport
Corporation, Trivandrum v. Susamma Thomas & Ors., (1994) 2 SCC
176, the Supreme Court held as under: -
"5......The determination of the quantum must answer what
contemporary society "would deem to be a fair sum such as would
allow the wrongdoer to hold up his head among his neighbours
and say with their approval that he has done the fair thing". The
amount awarded must not be niggardly since the law values life
and limb in a free society in generous scales'. All this means that
the sum awarded must be fair and reasonable by accepted legal
standards."
12. In Rattan Lal Mehta v. Rajinder Kapoor & Anr., 1996 ACJ 372, a
Division Bench of this Court speaking through the Hon'ble Chief Justice
held that full and fair compensation has to be paid for pecuniary and non-
pecuniary damages and not as a matter of solace. Non-pecuniary
damages cannot be kept low because pecuniary damages are high. It was
held that there should not be generally any discrimination between rich
and poor victims for evaluating non-pecuniary damages. The Division
Bench held that claims under different sub-heads can be altered but the
compensation more than the amount claimed cannot be awarded. Para 24
of the report is extracted hereunder:
"24. It is also now settled that though claimants might have
estimated in the pleadings different sums under different sub-
heads, it is still open to the Court to award higher under one sub-
head or lower under another, than claimed, so long as the award
does not exceed the total amount claimed. Such a principle was
laid down in Bai Nanda v. Shivabhai Shankarbhai Patel 1966 ACJ
290 Gujarat), (in fact, that was a case of murder), Judgment was
by J.B. Mehta and M.V. Shah, JJ. The adjustment was between
claims towards loss to dependency and loss to the estate. The same
principle was extended to claims in injuries cases in Babu Mansa
v. Ahmedabad Municipal Corporation, 1978 ACJ 485(Gujarat), by P.D.
Desai, J. (as he then was) and M.K. Shah, J."
13. The theory of not awarding compensation more than the amount claimed
got a sea change with the judgment of the Supreme Court in Nagappa v.
Gurudayal Singh & Ors., (2003) 2 SCC 274, wherein the Supreme Court
held that there is no restriction that compensation could be awarded only
up to the amount claimed by the Claimant. In an appropriate case where
from the evidence brought on record if the Tribunal/Court considers that
claimant is entitled to get more compensation than claimed, the Tribunal
may pass such an award. The Supreme Court said that the only embargo
was; that it should be „just‟ compensation, that is to say, it should be
neither arbitrary, fanciful nor unjustifiable. Para 21 of the report is
extracted hereunder:
"21. In our view, under the M.V. Act, there is no restriction
that Tribunal/Court cannot award compensation amount exceeding
the claimed amount. The function of the Tribunal/Court is to
award „just‟ compensation which is reasonable on the basis of
evidence produced on record. Further, in such cases there is no
question of claim becoming time barred or it cannot be contended
that by enhancing the claim there would be change of cause of
action. It is also to be stated that as provided under Sub-section(4)
to Section 166, even report submitted to the Claims Tribunal under
Sub-section (6) of Section 158 can be treated as an application for
compensation under the M.V. Act, If required, in appropriate
cases, Court may permit amendment to the claim Petition."
14. In National Insurance Company Ltd. v. Rani, 2006 ACJ 1224, a Division
Bench of Madras High Court held that without filing any Appeal or
Cross-Objections, High Court is competent to enhance the compensation
in favour of a victim of a motor vehicle accident by invoking provisions
of Order XLI Rule 33 Code of Civil Procedure(Code). Para 16 of the
report is extracted hereunder:
"16. At the risk of repetition it may be stated that the
contention put forward is that the Court is duty bound to fix the
just compensation. The fact that the Claimants have not filed any
cross objection would not stand in the way and further the Court
can by invoking the powers conferred under Order XLI Rule 33 of
CPC, is satisfied, can enhance the compensation and call upon the
Claimants to pay necessary court fee. In that context, the learned
counsel also submitted, when the Supreme Court has ruled that
even at the appellate stage original petition can be amended
claiming enhanced compensation, the Court enhancing
compensation in the instant case, if satisfied, invoking powers
under Order XLI, Rule 33 will certainly be in order."
15. In Oriental Fire and General Insurance Co. Ltd. v. Amarsingh
Pratapsingh Sikliker, 1(1993) ACC 627, a Division Bench of Gujarat
High Court held that the Appellate Court was empowered to grant
adequate compensation so as to do substantial justice between the parties
even in absence of Cross-Objections or Appeal. Para 17 of the report is
extracted hereunder:
"17. It becomes very clear from the aforesaid provisions that
the appellate Court is empowered to grant adequate relief so as to
do substantial justice between the parties even in absence of cross-
objections or appeal...."
16. In Sone Ram v. Jayaprakash, AIR 1986 MP 21, the High Court of
Madhya Pradesh exercising power under Order XLI Rule 33 of the Code
enhanced the compensation granted by the Claims Tribunal even though
no Appeal was preferred by the Claimant. In the case of Sewaram alias
Sewan v. Nanhe Khan alias Asgar Beg, 1987 ACJ 354(MP), the High
Court of Madhya Pradesh awarded 10% interest on the compensation
amount in the absence of any Appeal or Cross-Objections by the
Claimants.
17. A learned Single Judge of this Court in National Insurance Co. Ltd. v.
Komal & Ors., MANU/DE/2870/2012, (MAC. APP. No.595/2007
decided on: 27.04.2012) referred to the judgments of the Supreme Court
in Pannalal v. State of Bombay, AIR 1963 SC 1516; Rameshwar Prasad
v. M/s Shyam Beharilal Jagannath, (1964) 3 SCR 549; Nirmal Bala
Ghose v. Balai Chand Ghose, AIR 1965 SC 1874; Giasi Ram v. Ramjilal,
AIR 1969 SC 1144; Harihar Prasad Singh v. Balmiki Prasad Singh,
(1975) 2 SCR 932; Mahant Dhangir v. Madan Mohan, (1988) 1 SCR
679; State of Punjab v. Bakshish Singh, (1999) 8 SCC 222 and judgments
of various High Courts to opine that the High Court is empowered to
enhance the compensation without filing any Appeal or Cross-Objections
by a Claimant.
18. In Ibrahim v. Raju, AIR 2012 SC 534, a compensation of `3,00,000/- was
claimed by the Appellant which resulted in an award of `60,000/- by the
Claims Tribunal. The compensation was enhanced to `1,89,440/- by the
High Court, which was enhanced to `6,00,000/- by the Supreme Court.
Para 21 of the report is extracted hereunder:
"21. We are conscious of the fact that in the petition filed by him,
the Appellant had claimed compensation of Rs. 3 lacs only with
interest and cost. It will be reasonable to presume that due to
financial incapacity the Appellant and his family could not avail
the services of a competent lawyer and make a claim for adequate
compensation. However, as the Tribunal and the High Court and
for that reason this Court are duty bound to award just
compensation, (emphasis supplied) we deem it proper to enhance
the compensation from Rs. 1,89,440/- to Rs. 6 lacs. This approach
is in tune with the judgment in Nagappa v. Gurudayal Singh,
(2003) 2 SCC 274. In that case, the Court considered a similar
issue, referred to the judgments of the Bombay High Court in
Municipal Corporation of Greater Bombay v. Kisan Gangaram
Hire, 1987 ACJ 311(Bombay), Orissa High Court in Mulla Mod.
Abdul Wahid v. Abdul Rahim,1994 ACJ 348 (Orissa) and Punjab
and Haryana High Court in Devki Nandan Bangur v. State of
Haryana, 1995 ACJ 1288 (P & H)."
19. In New India Assurance Co. Ltd. v. Gopali & Ors., Civil Appeal No.5179
of 2012 (arising out of SLP (C) No.11345 of 2007) decided by the
Supreme Court on 05.07.2012, the New India Assurance Co. Ltd.
challenged an award of compensation of `6,45,300/-. The compensation
was, however, enhanced to `10,63,040/- by the Supreme Court.
20. It goes without saying that cases of serious injuries, that is, amputation of
limbs, paraplegia, quadriparesis etc. are worse than death cases. It is not
only the victim (the injured), but the entire family who suffers throughout
the time till the injured with the serious disability survives.
21. In Arvind Kumar Mishra v. New India Assurance Company Limited,
(2010) 10 SCC 254, the Supreme Court dealt with the case of disability of
an engineering student. The Supreme Court observed that while
awarding compensation in personal injury cases, an attempt should be
made to put the injured in the same position as he was as far as money is
concerned. In para 9 of the report, the Supreme Court held as under:
"9. We do not intend to review in detail state of authorities in
relation to assessment of all damages for personal injury. Suffice
it to say that the basis of assessment of all damages for personal
injury is compensation. The whole idea is to put the claimant in
the same position as he was insofar as money can. Perfect
compensation is hardly possible but one has to keep in mind that
the victim has done no wrong; he has suffered at the hands of the
wrongdoer and the court must take care to give him full and fair
compensation for that he had suffered."
22. In Nizam‟s Institute of Medical Sciences v. Prasanth S. Dhananka &
Ors., (2009) 6 SCC 1, the Supreme Court emphasized that cases of
serious injuries in motor vehicle accident are worse than the death cases
because the victim and his family suffers throughout life. Para 90 of the
report is extracted hereunder:-
"90. At the same time we often find that a person injured in an
accident leaves his family in greater distress vis-à-vis a family in a
case of death. In the latter case, the initial shock gives way to a
feeling of resignation and acceptance, and in time, compels the
family to move on. The case of an injured and disabled person is,
however, more pitiable and the feeling of hurt, helplessness,
despair and often destitution enures every day. The support that is
needed by a severely handicapped person comes at an enormous
price, physical, financial and emotional, not only on the victim but
even more so on his family and attendants and the stress saps their
energy and destroys their equanimity."
23. In Kavita v. Deepak & Ors., Civil Appeal No.5945/2012 decided on
22.08.2012, the Supreme Court laid down that an attempt should always
be made to award adequate compensation not only for physical injury and
treatment but also for the loss of earning and inability to lead a normal
life and enjoy amenities, which would have been enjoyed but for the
disability caused due to the accident.
24. Thus, there is no manner of doubt that if the High Court finds that the
compensation awarded is not just and reasonable, it is empowered to
enhance the compensation without filing of Appeal or Cross-Objections
by the Claimant.
25. The Appellant Insurance Company sought to make out a case that the
First Respondent misled the Claims Tribunal by initially stating that she
was a student of B.Com. final year and later on stated that she had
completed her graduation. It is established on record from the document
Ex.PW1/68 that the First Respondent had already completed her
graduation. The First Respondent clearly stated in her cross-examination
that the factum of her being a student of B.Com final year was not
correct. No explanation was sought from her as to why she did not state
this fact in the Claim Petition. I do not know the condition of the
Appellant. Admittedly, she is a case of quadriparesis on account of head
injuries suffered by her. I would not fathom into the reason as to why
instead of disclosing that she had completed her B.Com. (final year) she
stated that she was a student of final year. The fact remains that she
would not be able to do any work and has to be granted adequate
compensation towards loss of earning capacity.
26. In Raj Kumar v. Ajay Kumar & Anr., 2011 (1) SCC 343, the Supreme
Court brought out the difference between permanent disability and
functional disability resulting in the loss of earning capacity. It was laid
down that the compensation on account of loss of earning capacity has to
be granted in accordance to the nature of job undertaken by the victim of
motor accident. Paras 11 and 14 of the report are extracted hereunder:
"11. What requires to be assessed by the Tribunal is the effect
of the permanently disability on the earning capacity of the
injured; and after assessing the loss of earning capacity in terms of
a percentage of the income, it has to be quantified in terms of
money, to arrive at the future loss of earnings (by applying the
standard multiplier method used to determine loss of dependency).
We may however note that in some cases, on appreciation of
evidence and assessment, the Tribunal may find that percentage of
loss of earning capacity as a result of the permanent disability, is
approximately the same as the percentage of permanent disability
in which case, of course, the Tribunal will adopt the said
percentage for determination of compensation (see for example,
the decisions of this Court in Arvind Kumar Mishra v. New India
Assurance Co. Ltd. 2010 (10) SCC 254 and Yadava Kumar v.
D.M., National Insurance Co. Ltd. 2010 (10) SCC 341.
x x x x x x x
14.For example, if the left hand of a claimant is amputated, the
permanent physical or functional disablement may be assessed
around 60%. If the claimant was a driver or a carpenter, the
actual loss of earning capacity may virtually be hundred percent, if
he is neither able to drive or do carpentry. On the other hand, if
the claimant was a clerk in government service, the loss of his left
hand may not result in loss of employment and he may still be
continued as a clerk as he could perform his clerical functions;
and in that event the loss of earning capacity will not be 100% as
in the case of a driver or carpenter, nor 60% which is the actual
physical disability, but far less. In fact, there may not be any need
to award any compensation under the head of 'loss of future
earnings', if the claimant continues in government service, though
he may be awarded compensation under the head of loss of
amenities as a consequence of losing his hand. Sometimes the
injured claimant may be continued in service, but may not found
suitable for discharging the duties attached to the post or job
which he was earlier holding, on account of his disability, and may
therefore be shifted to some other suitable but lesser post with
lesser emoluments, in which case there should be a limited award
under the head of loss of future earning capacity, taking note of the
reduced earning capacity."
27. I have before me Dr. Naresh Chandra's (PW-2's) testimony. He was
categorical that on account of the disability suffered by her, the First
Respondent would not be able to do normal work, to move, to sit, get up
independently and climb stairs without any assistance. Thus, it is evident
that the First Respondent would not be able to carry out any work at all
throughout her life. Her loss of earning capacity is 100%.
28. As stated earlier, it is established on record that she is a Commerce
Graduate. On conservative estimate, I take minimum wages of a
Graduate and make an addition of 30% towards the inflation on the basis
of the Supreme Court judgment in Santosh Devi v. National Insurance
Company Ltd. & Ors., 2012 (4) SCALE 559 as noticed by this Court in
Rakhi v. Satish Kumar & Ors. (MAC. APP. 390/2011) decided on
16.07.2012.
29. The loss of earning capacity thus comes to `12,33,554/- (4393/- + 30% x
12 x 18).
30. The Claims Tribunal did not award any compensation towards future
treatment. Admittedly, the First Respondent did not produce any
evidence with regard to her future treatment. Considering the permanent
disability and testimony of Dr. Naresh Chandra (PW-2), I would make a
provision of `25,000/- towards future treatment.
31. In Kavita v. Deepak & Ors., Civil Appeal No.5945/2012 decided on
22.08.2012, where the victim became paraplegic, a compensation of
`3,00,000/- towards pain and suffering and `3,00,000/- towards loss of
amenities in life was awarded.
32. In the case of Govind Yadav v. New India Insurance Co. Ltd. (2011) 10
SCC 683, where a victim aged about 24 years suffered amputation of one
leg above knee, a compensation of `1.5 lacs was awarded towards pain
and suffering and another sum of `1.5 lacs was awarded towards loss of
amenities in life and loss of marriage prospects.
33. Thus, the compensation of `50,000/- each awarded towards pain and
suffering and loss of marriage prospects is on the lower side. Keeping in
view the long duration of the treatment and the fact that the First
Respondent shall suffer disability and pain throughout her life, I would
make a provision of `1.5 lacs towards pain and suffering and `1.5 lacs
towards loss of marriage prospects including loss of amenities in life.
34. The First Respondent has not been granted any compensation towards
Attendant charges. I have earlier referred to the testimony of PW-2 Dr.
Naresh Chandra who stated that the First Respondent would not be able
to do normal work, would not be able to move, sit and get up
independently, she would not able to climb stairs without any assistance.
35. In Delhi Transport Corporation and Anr. v. Lalita AIR 1981 Delhi 558, a
Division Bench of this Court held that a victim cannot be deprived of
compensation towards gratuitous services rendered by some family
members for the benefit of the tortfeasor. I therefore, award a
compensation @ `1000/- per month and on applying a multiplier of 18, it
comes to `2,16,000/- (1000/- x 12 x 18).
36. The compensation awarded is re-computed as under:-
Sl.No. Compensation under various heads Awarded by this
Court
1. Loss of Earning Capacity `12,33,554/-
2. Pain and Suffering ` 1,50,000/-
3. Loss of Marriage Prospects & Loss of ` 1,50,000/-
Amenities in Life
4. Attendant Charges (Gratuitous Services) `2,16,000/-
5. Medicines and Medical Treatment `2,25,507/-
6. Conveyance & Special Diet ` 30,000/-
7. Future Treatment ` 25,000/-
Total ` 20,30,061/-
37. The compensation is thus enhanced from `10,27,636/- to `20,30,061/-.
38. The enhanced compensation of `10,02,425/- shall carry interest @ 7.5%
per annum from the date of filing of the Petition till its payment.
39. Now, I turn to the Appellant's contention on liability. It is urged by the
learned counsel for the Appellant that since the Qualis was being used for
hire and reward, the Respondent No.3 committed a willful breach of the
terms of the policy. Learned counsel for the Appellant urges that the
Claims Tribunal instead of absolving the Appellant Insurance Company
directed it to pay the compensation with the right to recover it from
Respondents No.2 and 3 (the driver and owner).
40. 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 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 provisions 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 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........."
41. 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."
42. 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 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."
43. 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.
44. Thus, the Appellant was entitled to only recovery rights which have been
duly granted.
45. The compensation deposited shall be released in favour of the First
Respondent/held in fixed deposit in terms of the order passed by the
Claims Tribunal.
46. Appellant Oriental Insurance Company Limited is directed to deposit the
enhanced compensation `10,02,425/- along with interest with UCO Bank,
Delhi High Court Branch, New Delhi within six weeks.
47. 80% of the enhanced compensation shall be held in fixed deposit for a
period of two years, four years, six years, eight years, ten years, twelve
years, fourteen years, sixteen years, eighteen years and twenty years in
equal proportion. The First Respondent would be entitled to draw
quarterly interest on the abovesaid fixed deposits. 20% of the enhanced
compensation shall be released to her on deposit.
48. It goes without saying that the Appellant Insurance Company would be
entitled to recover the compensation amount from the Respondents No.2
and 3 in execution of this judgment without having recourse to
independent proceedings.
49. The Appellant Insurance Company shall file a report regarding deposit of
the enhanced compensation within eight weeks.
50. The Appeal stands disposed of in above terms.
51. Pending Applications also stand disposed of.
52. List on 09.11.2012.
(G.P. MITTAL)
JUDGE
SEPTEMBER 06, 2012
pst/vk
