Karnataka High Court
Sri.Chandrashekhar vs Smt.Khairunbi And Ors on 7 November, 2024
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NC: 2024:KHC-K:8195
MFA No. 202365 of 2018
C/W MFA No. 202364 of 2018
IN THE HIGH COURT OF KARNATAKA,
KALABURAGI BENCH
DATED THIS THE 7TH DAY OF NOVEMBER, 2024
BEFORE
THE HON'BLE MR JUSTICE SACHIN SHANKAR MAGADUM
MISCL. FIRST APPEAL NO. 202365 OF 2018 (MV-D)
C/W
MISCL. FIRST APPEAL NO. 202364 OF 2018 (MV-D)
IN MFA NO.202365/2018
BETWEEN:
SRI.CHANDRASHEKHAR
S/O. UMMAYYA HIREMATH,
AGED: 39 YRS, OCC: BUSINESS/
AUTO OWNER, R/O. KORWAR,
TQ:SINDAGI,
DIST: VIJAYAPUR-586101.
...APPELLANT
(BY SRI S. S. MAMADAPUR, ADVOCATE)
Digitally signed
by RENUKA
AND:
Location: HIGH
COURT OF
KARNATAKA 1. SMT.KHAIRUNBI
W/O. HUSAINSAB MULLA,
AGED: ABOUT: 28 YRS,
OCC: HOUSEHOLD WORK,
R/O. MANUR, NOW RESIDING AT KOKATANUR,
TQ:SINDAGI, DIST: VIJAYAPUR-586101.
2. SRI. SIRAJ S/O. HUSSAINSAB MULLA
AGED: 6 YEARS, OCC: NIL,
SINCE MINOR IS REP BY HIS
NATURAL MOTHER AND M/G. THE 1ST
RESPONDENT RESPONDENTS-1 AND 2
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MFA No. 202365 of 2018
C/W MFA No. 202364 of 2018
ARE R/O. KOKATNUR, TQ: SINDAGI
DIST: VIJAYAPUR-586101.
3. THE MANAGER
ROYAL SUNDARAM ALLIANCE
INSURANCE CO. LTD, CORPORATE CLAIM
DPEARTMENT, SUNDARAM TOWERS NO.
45 AND 46 WHITES ROAD, CHENNAI-600014.
4. SRI. AMEENSAB S/O MADARASA MULLA
AGE: 54 YRS, OCC: AGRICUALTURE,
R/O. MANUR, TQ:SINDAGI,
DIST: VIJAYAPUR-586101.
5. SMT. BEBIJAN W/O AMEENSAB MULLA
AGE: 52 YRS, OCC: AGRICULTURE,
R/O. MANUR, TQ: SINDAGI,
DIST: VIJAYAPUR-586101.
...RESPONDENTS
(BY SRI. SANGANAGOUDA V. BIRADAR, ADVOCATE FOR R1
AND R2; SRI. S.S. ASPALLI, ADVOCATE FOR R3; V/O. DTD:
28.10.2021 NOTICE TO R4 IS DISPENSED WITH)
THIS MFA IS FILED U/S. 173 (1) OF MV ACT, PRAYING TO
SET ASIDE THE JUDGMENT AND AWARD DATED 03.10.2018
PASSED BY THE LEARNED SENIOR CIVIL JUDGE, JMFC,
SIDNAGI AND MACT-X, SINDAGI IN MVC NO.27/2014.
IN MFA NO.202364 OF 2018
BETWEEN:
SRI.CHANDRASHEKHAR
S/O. UMMAYYA HIREMATH,
AGED: ABOUT 59 YEARS,
OCC:BUSINESS/AUTO DRIVER,
R/O KORWAR,
TQ. SINDAGI, DIST. VIJAYAPUR-586101
...APPELLANT
(BY SRI S. S. MAMADAPUR, ADVOCATE)
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MFA No. 202365 of 2018
C/W MFA No. 202364 of 2018
AND:
1. SRI.MALLAPPA
S/O. BASAPPA PATTAR,
AGED: ABOUT 59 YEARS,
OCC: CARPENTER, R/O. KOTATANUR,
TQ. SINDAGI, DIST. VIJAYAPUR-586101.
2. THE MANAGER
ROYAL SUNDARAM ALLIANCE
INSURANCE CO. LTD., CORPORATE CLAIM
DEPARTMENT, SUNDARAM TOWERS,
NO.45 AND 46, WHITES ROAD,
CHENNAI-600014.
...RESPONDENTS
(BY SRI SANGANAGOUDA V. BIRADAR, ADVOCATE FOR R1;
SRI C.S. KALABURAGI, ADVOCATE FOR R2)
THIS MFA IS FILED U/S. 173(1) OF MV ACT, PRAYING TO,
SET ASIDE THE JUDGMENT AND AWARD DATED-03.10.2018
PASSED BY THE LEARNED SENIOR CIVIL JUDGE, JMFC,
SINDAGI AND MACT-X, SINDAGI IN MVC NO.20/2014.
THESE APPEALS COMING ON FOR FURTHER HEARING,
THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER:
CORAM: HON'BLE MR JUSTICE SACHIN SHANKAR MAGADUM
ORAL JUDGMENT
(PER: HON'BLE MR JUSTICE SACHIN SHANKAR MAGADUM)
Captioned appeals are by the owner challenging the
liability fastened on the appellants herein and dismissal of
the claim petitions against the insurance company on the
ground that there is a breach of policy conditions.
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2. Learned counsel appearing for appellants/owner
citing the law laid down by the Full Bench of this Court
while answering the reference in the case of New India
Assurance Company Limited vs. Yallavva and
Another1 has vehemently argued and tried to persuade
this Court that the finding recorded by the Tribunal in
fastening liability on owner is perverse and contrary to the
law laid down by the Full Bench while answering the
reference. Reliance is also placed on a judgment rendered
by a Coordinate Bench in the case of A.Banu Prakahs vs.
Thimma Shetty and Others in MFA No.4945/2014.
3. Per contra, learned counsel appearing for
insurance company however vehemently argued and
contends that the doctrine of pay and recover cannot be
exercised when a owner prefers an appeal challenging the
liability fastened on him. The dictum laid down by the Full
Bench while answering the reference primarily is intended
to protect the rights of the third parties and therefore,
(2020) 3 KCCR 1469
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owner cannot prefer an appeal and request either the
Tribunal or this Court to direct the insurance company to
first to pay and then recover. The doctrine of pay and
recovery has to be exercised when the aggrieved party is
a third party and not the owner of the offending vehicle
involved in an accident.
4. Heard the counsels on record. This Court given
its anxious consideration to the judgment rendered by the
Division Bench of this Court in the case of Yallavva
(supra). This Court deems it fit to cull out the conclusions
recorded by the Full Bench while answering the reference.
Paragraph No.57 would be relevant, which reads as
follows:
"57. In the result, the questions referred to
in this appeal are answered as under:
i) Having regard to Section 149(1) read
with Section 149(7) whenever a case falls under
Section 149(2)(a) and the same is successfully
established or proved by the Insurance
Company, as per the twin tests laid by the
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Hon'ble Supreme Court in Swaran Singh,
nevertheless, the insurer or Insurance Company
is liable to satisfy the award vis-à-vis a third
party and is entitled to recover from the insured.
This is irrespective of, the policy being an Act
policy in terms of Section 147 pertaining to
compulsory coverage of risks of third parties and
other classes of persons stated therein or a
policy covering other risks by specific contract
being entered into in that regard and where
additional premium is paid by the insured i.e., a
contractual policy.
ii) Thus, the rule of pay and recover is
applicable in view of the mandate in Section
149(4) of the Act and even if there is a breach of
the terms of the insurance policy, the insurer is
bound to satisfy the judgment and award as if it
were a judgment debtor, even if it satisfies the
twin tests enunciated by the Hon'ble Supreme
Court under Section 149(4)(a) of the Act.
iii) If the Insurance Company makes out a
case under Section 149(2)(b) of the Act, then
also the Insurance Company has to satisfy the
award, as it is the duty of the Insurance
Company to indemnify the insured on the basis
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of the policy of the insurance and even when the
contract of insurance itself is void, nevertheless
the liability to indemnify the insured would arise
and insurer is entitled to recover from the
insured.
iv) Thus, in a case where Section 149(2)(b)
applies and the Insurance Company successfully
establishes that the policy is void, in such a case
also, the insurer is not absolved of its liability to
satisfy the judgment or award as rights or
obligations would flow even from a policy which
is void vis-à-vis third party. In such a case, the
insurer is not completely absolved of its liability,
the insured would have to satisfy the award vis-
à-vis the third party and recover from the
insured the amount paid to the third party and
may also have a right to seek damages from the
insured.
v) The judgment of the Division Bench of
this Court in Subramanyam, holding that a pay
and recovery order cannot be made as there is
no liability to pay or satisfy the award or decree
in respect of a case falling under Section 149(2)
is not correct. Hence, that portion of the
judgment in Subramanyam, which states that if
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the case falls within the scope of Section 149(2)
of the Act and the insurer is successful in
establishing any of the defences as stated
therein, it would be completely absolved of its
liability to satisfy the award is also not correct
and to that extent, it is held to be bad in law.
vi) Article 142 of the Constitution of India
being a power granted under the Constitution
only to the Supreme Court can be exercised in
appropriate cases only by the Apex Court.
Exercise of power under Article 142 by the
Hon'ble Supreme Court in a particular case
cannot be a precedent for other Courts and
Tribunals to exercise such a power unless the
same is indicated to be a precedent by the Apex
Court.
In the instant case, the appellant -
Insurance Company was directed to discharge its
liability, subject to the result of this reference.
The vehicle involved in the instant case is a
goods vehicle and the injured claimant was
travelling in a goods carriage. The Tribunal
awarded compensation of Rs.1,000/- with
interest at 6% p.a. from the date of petition till
deposit and to recover the same from the
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insured - respondent No.2 herein. If the
appellant - insurer has deposited the amount, it
is entitled to recover the said amount from the
first respondent - insured, as this is a case which
falls under Section 149(2)(a) of the Act as the
insured claimant was permitted to travel as a
passenger in a goods vehicle namely, tempo.
In the circumstances, the appeal is liable to
be dismissed and is dismissed.
Parties to bear their respective costs."
5. Upon meticulous examination of the conclusions
arrived at by the Full Bench, the argument advanced by
the learned counsel for the insurance company, while
appearing persuasive at first glance, fails to hold ground
when scrutinized in light of the established legal principles.
The Full Bench, while addressing the reference and
interpreting the doctrine of "pay and recover," delved
deeply into the scope and mandate of Section 149 of the
Motor Vehicles Act, 1988. This section, which governs the
obligations of insurers towards third-party claimants, has
been construed in a manner to ensure the protection of
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third-party rights, even in situations where a breach of the
terms of the insurance policy by the insured is established.
6. The crux of the issue revolves around the
insurer's liability to satisfy the award despite proving a
breach of the policy under Section 149(2). The Full Bench,
by examining precedents including the judgment of the
Hon'ble Supreme Court in NATIONAL INSURANCE CO.,
LTD., vs. SWARAN SINGH & OTHERS2, categorically
held that the principle of "pay and recover" is not merely
discretionary but a statutory mandate under Section
149(4) and 149(5). The insurer, thus, cannot absolve itself
of its liability to satisfy the award vis-à-vis third parties,
even when it succeeds in proving a breach under Section
149(2). This interpretation upholds the legislative intent to
protect innocent third parties who are not privy to the
contract of insurance but are entitled to compensation for
injuries or loss.
(2004)3 SCC 297
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7. A thorough reading of the conclusions recorded
by the Full Bench highlights a pivotal point: even when the
insurance company successfully establishes a defense
under Section 149(2)(b) of the M.V. Act -- for instance,
that the policy is void or the insured has violated the
terms of the insurance contract -- the insurer's obligation
to satisfy the award remains intact. This liability emanates
from the statutory framework of Section 149, which
prioritizes the rights of third parties over contractual
disputes between the insured and insurer.
8. The Full Bench emphasized that the rule of "pay
and recover" is deeply entrenched in the statutory
scheme, underscoring that the insurance policy,
irrespective of being void or voidable as against the
insured, remains a binding instrument vis-à-vis third
parties. The judgment clarified that indemnification of
third parties cannot be denied merely because of breaches
committed by the insured. Instead, the insurer, after
satisfying the award, is entitled to recover the paid
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amount from the insured. This interpretation aligns with
the broader public policy objective of ensuring the financial
protection of third parties, which forms the bedrock of
compulsory motor vehicle insurance.
9. Furthermore, the Full Bench, in its analysis,
distinguished between the insurer's primary liability to
satisfy the award and its subsequent right to recover. This
approach prevents a situation where third parties are left
uncompensated due to technical defenses raised by
insurers.
10. In light of the binding precedent laid down by
the Full Bench, it becomes evident that no exception can
be made in the present cases merely because the appeals
have been filed by the owner of the vehicle and not the
claimants, who are the actual aggrieved parties. The
findings of the Tribunal, which erroneously fastened the
liability on the owner alone, stand in clear contravention of
the principles enunciated by the Full Bench in Yallavva
(supra).
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11. Thus, the Tribunal's finding that the owner
alone was liable to satisfy the award is untenable in law.
By prioritizing the protection of third-party rights, the Full
Bench judgment underscores that the insurer cannot shirk
its responsibility to satisfy the award on mere
technicalities or breaches committed by the insured.
Accordingly, the liability in the present cases must rest on
the insurer, subject to its right to recover from the insured
as per the principles laid down in Yallavva (supra).
12. In view of the above, the finding of the Tribunal
fixing liability on the owner is reversed, and the appeals
are allowed in part, affirming the insurer's obligation to
discharge its liability under the rule of "pay and recover."
13. For the foregoing reasons, this Court passes the
following:
ORDER
a) Appeals are allowed in part.
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b) Respondent - Insurance company is hereby
directed to pay the compensation
determined by the Tribunal with interest at
the rate of 6% per annum excluding the
statutory deposit made by the appellants -
owner before this Court with liberty to
recover from Appellant /owner of offending
vehicle.
c) The statutory deposit shall be remitted
back to the Tribunal to enable the
claimants to withdraw the same.
Sd/-
(SACHIN SHANKAR MAGADUM)
JUDGE
Srt
CT-SW
