Delhi High Court
Oriental Insurance Co Ltd vs B.N. Venkamma & Ors on 19 February, 2015
Author: G.P. Mittal
$~11
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of decision: 19th February, 2015
+ MAC.APP. 45/2011
ORIENTAL INSURANCE CO LTD ..... Appellant
Through: Ms. Savita Singh, Adv.
versus
B.N. VENKAMMA & ORS ..... Respondents
Through: Mr. S.N.Parashar, Adv. for R-1 & R-2
Ms. Neerja Sachdeva, Adv. for
ICICI/R-7.
CORAM:
HON'BLE MR. JUSTICE G.P.MITTAL
G. P. MITTAL, J. (ORAL)
1. The only ground of challenge raised in the instant appeal is that the
Insurance Company having successfully proved the breach of terms
and conditions of the insurance policy, it ought to have been
exonerated from the liability to pay the compensation instead of mere
grant of recovery rights against the driver and owner of the offending
truck bearing registration no.HP-23-1341.
2. The question of statutory liability to pay the compensation was
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 victims accident. It
was laid down that the victim would be entitled to recover the
compensation from the insurer irrespective of breach of any condition
of the insurance policy. Again, a three Judge Bench of the Supreme
Court in Sohan Lal Passi v. P. Sesh Reddy, (1996) 5 SCC 21 analysed
the corresponding provisions under the Motor Vehicles Act, 1939 and
the Motor Vehicles Act, 1988 and approved the decision in Skandia
(supra). Thereafter, 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) and 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 from the insured if there was any breach of the
policy conditions on account of the vehicle being driven by a person
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........."
3. 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(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 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
..........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."
4. Also, a 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 (supra), Kamla (supra) and Lehru (supra). Para 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."
5. This Court in MAC APP. No.329/2010 titled 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 Malla Prakasarao v. Malla Janaki &
Ors.(2004) 3 SCC 343; 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 on the one hand and Sohan Lal Passi v. P.
Sesh Reddy, (1996) 5 SCC 21; New India Assurance Co., Shimla v.
Kamla and Ors., (2001) 4 SCC 342; United India Insurance Company
Ltd. v. Lehru & Ors., (2003) 3 SCC 338; National Insurance
Company Limited v. Swaran Singh & Ors., (2004) 3 SCC 297;
Oriental Insurance Co. Ltd. v. Zaharulnisha and Ors., (2008) 12 SCC
385; National Insurance Company Limited v. Geeta Bhat & Ors.,
2008 (12) SCC 426; and National Insurance Company Limited v.
Laxmi Narain Dhut, (2007) 3 SCC 700 on the other and held that in
view of the three Judge Bench decisions 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 conscious breach of the terms of the insurance
policy, it would merely be entitled to recovery rights against the owner
or driver, as the case may be.
6. In view of the settled proposition of law, the Appellant Oriental
Insurance Company Limited was only entitled to recovery rights
which have been granted.
7. The appeal, therefore, has to fail; the same is accordingly dismissed.
8. Pending applications, if any, also stand disposed of.
9. Statutory amount, if any, shall be refunded to the Appellant Insurance
Company.
10. The compensation awarded by the Claims Tribunal shall be released in
favour of the Claimants (Respondents no.1 and 2) in terms of the order
passed by the Claims Tribunal.
(G.P. MITTAL)
JUDGE
FEBRUARY 19, 2015
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