Delhi High Court
Shri Rajesh Kumar Walia vs Shri Rajiv Kumar & Anr. on 18 February, 2015
Author: G.P. Mittal
$-8, 27 &28
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Decided on: 18th February, 2015
+ MAC.APP.157/2014
SHRI BHIM SINGH ..... Appellant
Through: Mr. Vijay Kumar Wadhwa,
Advocate
versus
SHRI RAJIV KUMAR & ANR. ..... Respondents
Through: Ms. Shantha Devi Raman, Adv.
for R-2.
+ MAC.APP.823/2013
SMT. SUDESHI WALIA ..... Appellant
Through: Mr. Vijay Kumar Wadhwa,
Advocate
versus
SHRI RAJIV KUMAR & ANR. ..... Respondents
Through: Ms. Shantha Devi Raman, Adv.
for R-2.
+ MAC.APP.184/2014
SHRI RAJESH KUMAR WALIA ..... Appellant
Through: Mr. Vijay Kumar Wadhwa,
Advocate
versus
SHRI RAJIV KUMAR & ANR. ..... Respondents
Through: Ms. Shantha Devi Raman, Adv.
for R-2.
MAC APP 157/2014, 823/2013 & 184/2014 Page 1 of 14
CORAM:
HON'BLE MR. JUSTICE G.P.MITTAL
JUDGMENT
G. P. MITTAL, J. (ORAL)
1. The Appellants are aggrieved by the order dated 24.05.2013
passed by the Motor Accident Claims Tribunal (the Claims
Tribunal) whereby the Claim Petitions filed by the Appellants
were dismissed simply on the ground that the legal
representatives of the driver-cum-owner, who was Respondent
no.1 before the Claims Tribunal were not impleaded.
2. It is very unfortunate that the Appellants were left remediless in
spite of the fact that confirmation had been received from the
police authorities that there was no legal heir of the deceased
who could have been impleaded. Para 2 of the impugned
judgment is extracted hereunder:-
"2. During the course of proceedings, it has
come on record that the driver-cum-owner has
expired. The fact also got confirmed by police
officials and it has reported that there is no legal
heirs of deceased. Further from statement of
Sh.Rameshwar Sharma UDC from Transport
Department, West Zone, Janak Puri, it is evident
that offending vehicle bearing No.DL-4C-U-7425
was sold to one Sh. Sunder Lal S/o Sh.Budha Ram
by Rajeev Kumar (driver) on 03.05.2011."
3. Otherwise also, as per provision of Section 155 of the Motor
Vehicles Act, 1988, the cause of action against the owner and
the insurer will survive in spite of the death of the owner of the
vehicle. Of course, the cause of action against the owner will
survive only to the extent of the estate left by him.
4. The question came up for consideration before the Punjab &
Haryana High Court in Natha Singh v. Gurdial Singh & Ors.,
AIR 1982 P&H 38, where while dealing with provision of
Section 102 of the Motor Vehicles Act, 1939 which is pari
materia with the provision of Section 155 of the M.V. Act of
1988, the Punjab and Haryana High Court held as under:-
"3. Section 96 of the Act provides for the duty of the
insurers to satisfy judgments against persons insured
in respect of third party risks. It also provides that the
insurance company or the insurer to whom the notice
of the bringing of any such proceedings is given, shall
be entitled to be made a party thereto and to defend
the action on any of the grounds given therein.
Section 102 of the Act provides,--
"Notwithstanding anything contained in Section 306
of the Indian Succession Act, 1925 (XXXIX of 1925),
the death of a person in whose favour a certificate of
insurance had been issued, if it occurs after the
happening of an event which has given rise to a claim
under the provisions of this Chapter, shall not be a
bar to the survival of any cause of action arising out
of the said event against his estate or against the
insurer."
In view of these provisions of the Act, it cannot be
said that the insurance company is not liable to satisfy
the claim for compensation to be awarded in the
claim application simply because the legal
representatives of Amrit Lal Gupta insured who died
during the pendency of the proceedings, were not
brought on the record. It is particularly so because in
the insurance policy, Exhibit R-11, it has been
provided inter alia vide Cl. (4) of Section II, thereof
that the company may, on its own option, undertake
the defence of proceedings in any Court of law in
respect of any act or alleged offence causing or
relating to any event which may be the subject of
indemnity under that section. It was because of this
term of the policy that the insurance company took a
specific plea in paragraph 3 of their additional
grounds that it had taken over the defence of the claim
petition in the name of the insured to contest the
claim, as they had reserved the right under the policy
of insurance. As observed earlier, this claim was
accepted by the Tribunal and on that account, it was
allowed to cross-examine the witnesses, on merits, as
well. Under the circumstances, the ratio of the
decision in Norati Devi's case, (AIR 1978 Punj & Har
113) (supra), is most relevant It has been held therein
(at p. 114),--
"Section 96 only clarifies that if an award is made, it
would be the duty of the insurance company to meet
the claim. It nowhere lays down that if the insurance
company is allowed to contest the liability in the
absence of the insurer, it should not be held liable.
Therefore, it cannot be contended that an insurance
company can never be held liable so long as the
insured is not impleaded as a party to the
proceedings, or having been impleaded his name is
ordered to be struck off from the array of the
respondents on the basis that he enjoys diplomatic
immunity from being sued in a Court."
In view of the abovesaid decision of this Court, the
claim application of Natha Singh, appellant, could not
be dismissed on the ground that the legal
representatives of Amrit Lal Gupta, deceased, were
not brought on the record."
5. Thus, it is clear that the Claim Petition could have proceeded
against Respondent no.2, insurer of the vehicle.
6. The Claims Tribunal appeared to have been swayed by the fact
that the driving licence of the driver-cum-owner on verification
was found to be fake. The Claims Tribunal opined that in such
case, even the Insurance Company will not have any liability.
This finding of the Claims Tribunal too cannot be sustained.
7. The issue of satisfying third party liability even in case of
breach of the terms of insurance policy is settled by a three
Judge Bench report of the Apex Court in Sohan Lal Passi v.
P. Sesh Reddy, (1996) 5 SCC 21. As per Section 149(2) of the
Motor Vehicles Act, 1988, (the Act), an insurer is entitled to
defend an action on the grounds as mentioned under Section
149(2)(a)(i) and (ii) of the Act. Thus, the onus is on the insurer
to prove that there is breach of the conditions of the insurance
policy. It is well settled that the breach must be conscious and
willful. However, even if a conscious breach on the part of the
insured is established, still the insurer has a statutory liability to
pay compensation to the third party and it 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 also
discussed in great detail by a two Judge Bench of the Supreme
Court in Skandia Insurance Company Limited v. Kokilaben
Chandravadan, (1987) 2 SCC 654 wherein it was held that an
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 conditions of insurance
policy. The three Judge Bench of the Supreme Court in Sohan
Lal Passi analysed the corresponding provisions under the
Motor Vehicles Act, 1939 and the Motor Vehicles Act, 1988
and approved the decision in Skandia. Again, 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 and the three Judge Bench decision in Sohan
Lal Passi 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 by a driver 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........."
8. 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 decisions in Skandia, Sohan Lal Passi and
Kamla 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 Vehicles Act, 1988, 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."
9. Thereafter, the three Judge Bench of the Supreme Court in
National Insurance Company Limited v. Swaran Singh & Ors.,
(2004) 3 SCC 297 again emphasised that the liability of the
insurer to satisfy the decree passed in favour of the third party
was statutory. It approved the decisions in Sohan Lal Passi,
Kamla and Lehru. 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."
10. This Court in Oriental Insurance Company Limited v. Rakesh
Kumar and Others, 2012 ACJ 1268 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 decisions in Sohan Lal
Passi(supra) and Swaran Singh, the liability of the Insurance
Company vis-à-vis the third party is statutory. If the Insurance
Company successfully proves conscious breach of the terms of
the insurance policy, then it would only be entitled to recovery
rights against the owner or driver, as the case may be.
11. Thus, even if the owner has died and the Insurance Company
proves willful breach of the conditions of policy, still the
Insurance Company cannot avoid its statutory liability
irrespective of the fact whether it will/will not be able to recover
the compensation paid to the third party from the insured. This
question was dealt with by the Supreme Court in para 18 in
United India Insurance Co. Ltd. v. Lehru & Others, (2003) 3
SCC 338, wherein it was held as under:-
"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. The injured or relatives of the person
killed in the accident may find that the decree
obtained by them is only a paper decree as the
owner is a man of straw. The owner himself would
be an innocent sufferer. It is for this reason that
the legislature, in its wisdom, has made insurance,
at least third-party insurance, compulsory. The
aim and purpose being that an insurance company
would be available to pay. The business of the
company is insurance. In all businesses there is an
element of risk. All persons carrying on business
must take risks associated with that business. Thus
it is equitable that the business which is run for
making profits also bears the risk associated with
it. At the same time innocent parties must not be
made to suffer or loss. These provisions meet these
requirements. We are thus in agreement with what
is laid down in the aforementioned cases viz. that
in order to avoid liability it is not sufficient to
show that the person driving at the time of
accident was not duly licensed. The insurance
company must establish that the breach was on the
part of the insured."
12. The appeals, therefore, have to succeed; the same are
accordingly allowed.
13. It goes without saying that the Claims Tribunal will be entitled
to go into the question whether there was willful and conscious
breach of the terms and conditions of the insurance policy on
the part of the insured and if it is so found, in view of the
observations made above, the Respondent Insurance Company
will be entitled to recovery rights so far as the estate of the
deceased is concerned.
14. The Insurance Company shall also be at liberty to search for the
legal heirs of the owner and if any is found, to implead them.
15. Pending applications also stand disposed of.
16. Parties to appear before the Claims Tribunal on 16.03.2015.
(G.P. MITTAL)
JUDGE
FEBRUARY 18, 2015
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