Delhi High Court
New India Assurance Co. Ltd. vs Mukesh Kumar & Ors. on 18 February, 2015
Author: G.P. Mittal
$-16
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Decided on: 18th February, 2015
+ MAC.APP.1305/2012
NEW INDIA ASSURANCE CO. LTD. ..... Appellant
Through: Mr. K.L.Nandwani, Adv.
versus
MUKESH KUMAR & ORS. ..... Respondents
Through: Ms. Pratibha Shukla, Adv. for
R-1.
Mr. R.B. Shami, Adv. for R-3.
CORAM:
HON'BLE MR. JUSTICE G.P.MITTAL
JUDGMENT
G. P. MITTAL, J. (ORAL)
CM APPL.292/2014 (O.1 Rule 10 CPC)
1. This application has been moved by the Appellant for deletion
of Respondents no.4 to 6. Since the Appellant Insurance
Company has not challenged the amount of compensation,
Respondents no.4 to 6 are not really concerned with the instant
appeal. Their presence is dispensed with.
2. Service is complete.
3. Application stands disposed of.
MAC.APP.1305/2012
4. The only ground of challenge raised by the learned counsel for
the Appellant Insurance Company is that the Appellant having
proved conscious and willful breach of the terms and conditions
of the insurance policy, it ought to have been completely
exonerated from payment instead of making it liable to pay its
share of compensation and then to recover it later from the
insured.
5. The issue of satisfying third party liability even in case of
breach of 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 the
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
from the insured 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........."
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 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."
7. 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."
8. 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.
9. In view of this, only recovery rights could have been granted to
the Appellant Insurance Company, which has been done.
10. The appeal, therefore, has to fail; the same is accordingly
dismissed.
11. Pending applications also stand disposed of.
12. Statutory amount, if any, shall be refunded to the Appellant
Insurance Company.
(G.P. MITTAL)
JUDGE
FEBRUARY 18, 2015
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