The New India Insurance Co Ltd vs Valiben Bhikhabhai Jogadiya
2025 Latest Caselaw 5696 Guj

Gujarat High Court

The New India Insurance Co Ltd vs Valiben Bhikhabhai Jogadiya on 16 April, 2025

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                              C/FA/380/2025                                 ORDER DATED: 16/04/2025

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                                   IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

                                                R/FIRST APPEAL NO. 380 of 2025

                      ==========================================================
                                               THE NEW INDIA INSURANCE CO LTD
                                                            Versus
                                              VALIBEN BHIKHABHAI JOGADIYA & ORS.
                      ==========================================================
                      Appearance:
                      MS KIRTI S PATHAK(9966) for the Appellant(s) No. 1
                      NISHIT A BHALODI(9597) for the Defendant(s) No. 1,2,3,4,5
                      NOTICE SERVED for the Defendant(s) No. 6
                      SERVED BY AFFIX(N) for the Defendant(s) No. 7
                      ==========================================================

                         CORAM:HONOURABLE MR. JUSTICE DEVAN M. DESAI

                                                        Date : 16/04/2025

                                                         ORAL ORDER

1. The present First Appeal is filed by the appellant

- Insurance Company against the common judgment and

award dated 05.06.2024 passed by the learned Motor

Accident Claims Tribunal (Aux.), Junagadh in MACP No.

of 38 of 2020 and allied matters, wherein the learned

Tribunal has partly allowed the claim petition.

2. Heard learned advocate Ms.Kirti Pathak for the

appellant and learned advocate Mr.Nishit Bhalodi for

respondent Nos.1 to 5. Though served, none appeared for

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respondent Nos.6 and 7.

3. Brief facts of the case are as under:-

3.1 On 11.01.2020, at about, 2 O' clock, deceased

alongwith his family members were travelling in city ride

bus bearing registration No.GJ-11-X-723. When the bus

was proceeding between Lalpur and Vekariya, at that time,

driver of bus lost control over steering and bus dashed

with electric pole on the side of road. Resultantly, bus

turned turtle. Due to which, deceased along with other

passengers sustained serious injuries. Whereas claim

petitions were filed by passengers of the city ride bus. FIR

was lodged against the driver of bus.

3.2 Claimants filed a claim petition under Section

166 of the Motor Vehicle Act, claiming compensation of

Rs.53,00,000/-. All claim petitions, being MACP Nos.18,

19, 20, 21, 38, 51 of 2020 and 127 of 2021, were consoli-

dated and heard together. The present First Appeal is aris-

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ing out of MACP No.38 of 2020. Claimant No.1 examined

at Ex.53. In support of the claim petition, claimants

produced documentary evidence such as FIR, Panchnama

of place of accident, chargesheet, Postmortem report,

Salary slip. Additionally, the statement of Opponent No.1 -

the driver of the bus recorded before Disavadar Police Sta-

tion at Ex.52 was also produced by the opponent. The de-

position of the bus owner was recorded at Exhibit 78, and

the deposition of the investigating officer at Exhibit 79.

Though, opponent Nos.1 & 5 were served with the notices

but did not remain present. Opponent No.2 filed Written

Statement denying the allegations made in claim petition.

Opponent No.3 - Insurance Company appeared and filed

Written Statement and denied its liability.After considering

the evidence on record, learned Tribunal partly allowed all

the claim petitions except MACP Nos.51 of 2020 and 127

of 2021. Opponent No.3 - Insurance Company was

directed to satisfy award and was granted entitlement to

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recover the same from insured i.e. opponent No.2 under

the pay and recover principle. Learned Tribunal awarded

compensation of Rs.35,96,632/- with 7% interest per

anuum from the date of petition till ralization and propor-

tionate costs from opponent Nos.1 to 3 jointly and sever-

ally.

3.4 Being aggrieved and dissatisfied with the

impugned judgment and award, appellant-Insurance

Company has filed present First Appeal.

4. At the outset, learned advocate for the appellant

submitted that the bus driver was not holding a valid and

effective driving licence at the time of accident. The

Investigating Officer also confirmed said fact. The

investigating officer has deposed that he inquired with

RTO, Junagadh and RTO Amreli but no evidence was

found from respective RTO Offices.

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4.1 It is further submitted that when there is a

contractual breach committed by the owner of vehicle, the

Insurance Company can not be saddled with the liability to

indemnify insured. Furthermore, even the pay and

recovery principle should not apply in cases where there is

a clear breach of terms and conditions of the policy. The

FIR also indicates that 30 passengers were travelling in

bus, thereby violating the terms of usage of the vehicle.

Despite repeated demands by Insurance Company and

Police Authorities, Opponent Nos.1 and 2, failed to

produce the driving licence. Learned Tribunal has also

found that the driver of offending bus was not holding

valid and effective licence. However, instead of

exonerating the Insurance Company from its liability

passed an order of pay and recovery.

4.2 Learned advocate for the appellant has placed

reliance upon the decision of Hon'ble Supreme Court in

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the case of Shamanna and Another Vs. Divisional Manager,

Oriental Insurance Company Limited and Others reported in

(2018) 9 SCC 650 and submitted that it is the duty of

insurer to satisfy the order and direction to pay and

recover, is just and valid. It is further submitted that the

Hon'ble Karnatka High Court, reversed the order passed by

the Tribunal for pay and recover holding the owner of the

vehicle liable to pay compensation. The challenge against

the said order before the Apex Court was made by the

claimant.

4.3 Learned advocate for the appellant has also

relied upon the following decisions:-

(i) Bhuwan Singh Vs. Oriental Insurance Company Ltd. & Anr. passed by the Hon'ble Supreme Court decided on 05.03.2009.

(ii) United India Assurance Company Ltd. Vs. Gian Chan & Ors.

(iii) Bajal Allianz General Insurance Company Limited Vs. Vivekbhai Manubhai Kava & Ors.

passed by this Court in First Appeal No.4111 of 2022 on 31.01.2025.

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5. Per contra, learned advocate for respondent

Nos.1 to 5 - original claimants has supported the

judgment and award and has submitted that any dispute

between the insured and insurer of the vehicle, should not

prejudice the claimants. The learned Tribunal has rightly

applied pay and recover principle since the vehicle was

insured at the time of accident.

6. In rejoinder, learned advocate for the appellant

has submitted that, pay and recover order can only be

passed by the Apex Court while exercising the powers

under Articles 136 and 142 of the Constitution of India. It

is submitted that the Tribunal as well as High Court has

no jurisdiction to pass any order for pay and recover in

cases of breach of terms and conditions of policy, more

particularly, in the cases where the driver of offending

vehicle is not holding valid and effective licence.

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7. I have considered the submissions canvassed by

learned advocates for the respective parties and perused

the record and proceedings. It is undisputed fact which is

coming out from the record that the offending vehicle i.e.

bus bearing registration No.GJ-11X-723 was insured with

the present appellant. However, the driver of bus did not

possess a valid and effective driving licence. It also

appears from the record, that the investigating officer, who

investigated the case, has also stated that even after

inquiry from Junagadh and Amreli, RTO Offices, the

authority could not find that the driver of offending bus

was holding a valid and effective driving licence. Even the

oral deposition of driver of bus before the police authority

also reveals that he was not holding a valid and effective

driving licence. Once a fact that driver of bus was not

holding a valid and effective driving licence is established,

whether the Insurance Company can be held liable to pay

compensation to the claimants, who are third parties is the

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question to be considered by this Court. The question

involved in the present appeal with regard to breach of

terms and conditions of the policy, is no more res-integra.

8. In the case of Shamanna (supra), in paragraph

Nos.6, 7, 11, 12 and 13, the Hon'ble Supreme Court has

observed as under:

"6.As per the decision in Swaran Singh case, onus is always upon the insurance company to prove that the driver had no valid driving licence and that there was breach of policy conditions. Where the driver did not possess the valid driving licence and there are breach of policy conditions, "pay and recover" can be ordered in case of third party risks. The Tribunal is required to consider as to whether the owner has taken reasonable care to find out as to whether the driving licence produced by the driver, does not fulfill the requirements of law or not will have to be determined in each case.

7. The Supreme Court considered the decision of Swaran Singh case in subsequent decision in National Insurance Co. Ltd. v. Laxmi Narain Dhut, (2007) 3 SCC 700, wherein this Court held that:

"5. The decision in Swaran Singh case has no application to cases other than third party risks and in case of third party risks the insurer has to indemnify the amount and if so advised, to recover the same from the insured".

11. In the present case, to deny the benefit of

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'pay and recover', what seems to have substantially weighed with the High Court is the reference to larger Bench made by the two-Judge Bench in National Insurance Co. Ltd. v. Parvathneni and another (2009) 8 SCC 785 which doubted the correctness of the decisions which in exercise of jurisdiction under Article 142 of the Constitution of India directing insurance company to pay the compensation amount even though insurance company has no liability to pay. In Parvathneni case, the Supreme Court pointed out that Article 142 of the Constitution of India does not cover such type of cases and that:

"if the insurance company has no liability to pay at all, then, it cannot be compelled by order of the court in exercise of its jurisdiction under Article 142 of the Constitution of India to pay the compensation amount and later on recover it from the owner of the vehicle".

12. The above reference in Parvathneni case has been disposed of on 17.09.2013 by the three-Judges Bench keeping the questions of law open to be decided in an appropriate case.

13. Since the reference to the larger bench in Parvathneni case has been disposed of by keeping the questions of law open to be decided in an appropriate case, presently the decision in Swaran Singh case followed in Laxmi Narain Dhut and other cases hold the field. The award passed by the Tribunal directing the insurance company to pay the compensation amount awarded to the claimants and thereafter, recover the same from the owner of the vehicle in question, is in accordance with the judgment passed by this Court in Swaran Singh and Laxmi Narain Dhut cases. While so, in our view,

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the High Court ought not to have interfered with the award passed by the Tribunal directing the first respondent to pay and recover from the owner of the vehicle. The impugned judgment of the High Court exonerating the insurance company from its liability and directing the claimants to recover the compensation from the owner of the vehicle is set aside and the award passed by the Tribunal is restored."

9. In the case of National Insurance Co. Ltd vs

Swaran Singh & Ors reported in (2004) 3 SCC 297, in

paragraph No.110, the Hon'ble Supreme Court has

observed as under:-

Summary of findings:-

"110.The summary of our findings to the various issues as raised in these petitions are as follows:

(i) Chapter XI of the Motor Vehicles Act, 1988providing compulsory insurance of vehicles against third party risks is a social welfare legislation to extend relief by compensation to victims of accidents caused by use of motor vehicles. The provisions of compulsory insurance coverage of all vehicles are with this paramount object and the provisions of the Act have to be so interpreted as to effectuate the said object.

(ii) Insurer is entitled to raise a defence in a claim petition filed under Section 163 A or Section 166 of the Motor Vehicles Act, 1988 inter alia in terms of Section 149(2)(a)(ii)of the said Act.

(iii) The breach of policy condition e.g.,

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disqualification of driver or invalid driving licence of the driver, as contained in sub-section (2)(a)(ii) of section 149, have to be proved to have been committed by the insured for avoiding liability by the insurer. Mere absence, fake or invalid driving licence or disqualification of the driver for driving at the relevant time, are not in themselves defences available to the insurer against either the insured or the third parties. To avoid its liability towards insured, the insurer has to prove that the insured was guilty of negligence and failed to exercise reasonable care in the matter of fulfilling the condition of the policy regarding use of vehicles by duly licensed driver or one who was not disqualified to drive at the relevant time.

(iv) The insurance companies are, however, with a view to avoid their liability must not only establish the available defence(s) raised in the said proceedings but must also establish 'breach' on the part of the owner of the vehicle; the burden of proof wherefor would be on them.

(v) The court cannot lay down any criteria as to how said burden would be discharged, inasmuch as the same would depend upon the facts and circumstance of each case.

(vi) Even where the insurer is able to prove breach on the part of the insured concerning the policy condition regarding holding of a valid licence by the driver or his qualification to drive during the relevant period, the insurer would not be allowed to avoid its liability towards insured unless the said breach or breaches on the condition of driving licence is/ are so fundamental as are found to have contributed to the cause of the accident. The Tribunals in interpreting the policy conditions

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would apply "the rule of main purpose" and the concept of "fundamental breach" to allow defences available to the insured under section 149(2) of the Act.

(vii) The question as to whether the owner has taken reasonable care to find out as to whether the driving licence produced by the driver, (a fake one or otherwise), does not fulfil the requirements of law or not will have to be determined in each case.

(viii) If a vehicle at the time of accident was driven by a person having a learner's licence, the insurance companies would be liable to satisfy the decree.

(ix) The claims tribunal constituted under Section 165 read with Section 168 is empowered to adjudicate all claims in respect of the accidents involving death or of bodily injury or damage to property of third party arising in use of motor vehicle. The said power of the tribunal is not restricted to decide the claims inter se between claimant or claimants on one side and insured, insurer and driver on the other. In the course of adjudicating the claim for compensation and to decide the availability of defence or defences to the insurer, the Tribunal has necessarily the power and jurisdiction to decide disputes inter se between insurer and the insured. The decision rendered on the claims and disputes inter se between the insurer and insured in the course of adjudication of claim for compensation by the claimants and the award made thereon is enforceable and executable in the same manner as provided in Section 174 of the Act for enforcement and execution of the award in favour of the claimants.

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(x) Where on adjudication of the claim under the Act the tribunal arrives at a conclusion that the insurer has satisfactorily proved its defence in accordance with the provisions of section 149(2) read with sub-section (7), as interpreted by this Court above, the Tribunal can direct that the insurer is liable to be reimbursed by the insured for the compensation and other amounts which it has been compelled to pay to the third party under the award of the tribunal.

Such determination of claim by the Tribunal will be enforceable and the money found due to the insurer from the insured will be recoverable on a certificate issued by the tribunal to the Collector in the same manner under Section 174 of the Act as arrears of land revenue. The certificate will be issued for the recovery as arrears of land revenue only if, as required by sub-section (3) of Section 168 of the Act the insured fails to deposit the amount awarded in favour of the insurer within thirty days from the date of announcement of the award by the tribunal.

(xi) The provisions contained in sub-section (4) with proviso thereunder and sub-section (5) which are intended to cover specified contingencies mentioned therein to enable the insurer to recover amount paid under the contract of insurance on behalf of the insured can be taken recourse of by the Tribunal and be extended to claims and defences of insurer against insured by relegating them to the remedy before regular court in cases where on given facts and circumstances adjudication of their claims inter se might delay the adjudication of the claims of the victims.

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11. While discussing the issue of pay and recover,

the Apex Court has also taken into consideration the

decision of Swarn Singh (supra) where it has been held

that when the driver did not possess a valid driving

licence and when there is a breach of terms and conditions

of the policy 'Pay and Recover' can be ordered in the case

of third party risk. It has also been observed in the case of

Oriental Insurance Company Ltd. Vs. Nanjappan reported in

(2004) 13 SCC 224, it is held that the insurer need not file

a separate civil suit to recover the amount and may

initiate proceedings before the executing court.

12. Applying these principles, learned Tribunal

rightly found that though the driver did not have a valid

licence, the Insurance Company should first pay the

awarded amount and then recover it from the vehicle

owner.

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13. In the case of M/s. Chatha Service Station Vs.

Lalmati Devi & Ors. Hon'ble Supreme Court in Special

Leave Petition (C) No.25789-25792/2019 on 08.04.2025.

While deciding an issue where, the driver of the goods

vehicle carrying dangerous and hazardous goods is

required proper training and licence as prescribed under

Rule 9 of the Central Motor Vehicles Rules, 1989 held that

driver is also required to get an endorsement of such

training having been gone in the transportation vehicle

licence possessed by him. The Tribunal also directed the

Insurance Company to pay the awarded amount and to

recover it from the owner and driver of offending vehicle.

In paragraph Nos. 16 and 17, the Apex Court has also

considered the decision of Swarn Singh which is as under:

"16. In the present case there was a contention taken by the driver of the vehicle who was examined before the Tribunal that he swerved the vehicle to save pedestrians and this caused the accident. However, the deposition of CW2, the eye- witness goes contrary to the said self- serving statement of the driver, coupled with the fact that

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the charge sheet also was against the driver, for the offence of causing death by reason of rash and negligent driving. The eye-witness clearly deposed that the accident was caused by the reason of "rash and negligent driving of the vehicle" which the driver was not entitled to drive for reason of lack of endorsement on his licence as required under Section 11 read with Rule 9 of the Act and Rules.

17. Admittedly, the driver did not have a licence as required under the Act and the Rules to drive a vehicle carrying dangerous and hazardous goods. There is also no dispute that the offending vehicle; the oil tanker, was a vehicle intended to carry goods of dangerous and hazardous nature. The contention taken by the owner of the offending vehicle that there was no goods carried at the time of the accident, was negated by both the Tribunal and the High Court finding from the testimony of the driver that it was carrying oil at the relevant time."

14. In view of the aforesaid discussions and settled

legal position, I do not find any substance in the appeal.

Hence, First Appeal is dismissed.

15. Record and proceedings, if any, received, be

sent back to the concerned Court/Tribunal.

(D. M. DESAI,J) MANOJ