Madhya Pradesh High Court

Cholamandlam Ms General Insurance ... vs Dharmendra Kushwah on 31 October, 2025

Author: Gurpal Singh Ahluwalia

Bench: G. S. Ahluwalia

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IN THE HIGH COURT OF MADHYA PRADESH
AT G WA L I O R
BEFORE
HON'BLE SHRI JUSTICE G. S. AHLUWALIA

ON THE 31st OF OCTOBER, 2025

MISC. APPEAL No. 783 of 2016
CHOLAMANDLAM MS GENERAL INSURANCE CO.LTD.
Versus
MANOJ KUMAR JATAV AND OTHERS

Appearance:
Shri N.S. Tomar - Advocate for appellant/Insurance Company.
Shri R.P. Gupta - Advocate for respondents No.3 & 4.

WITH
CIVIL REVISION No. 81 of 2016
CHOLAMANDLAM MS GENERAL INSURANCE CO.LTD.
Versus
PHOOL SINGH AND OTHERS

Appearance:
Shri N.S. Tomar - Advocate for applicant/Insurance Company.
None for the respondents.

WITH
CIVIL REVISION No. 82 of 2016
CHOLAMANDLAM MS GENERAL INSURANCE CO.LTD.
Versus

Signature Not Verified
Signed by: AMAN TIWARI
Signing time: 04-11-2025
02:36:36 PM
NEUTRAL CITATION NO. 2025:MPHC-GWL:27718

DHARMENDRA KUSHWAH AND OTHERS

Appearance:
Shri N.S. Tomar - Advocate for applicant/Insurance Company.
None for the respondents.

WITH
MISC. APPEAL No. 784 of 2016
CHOLAMANDLAM MS GENERAL INSURANCE CO.LTD.
Versus
SMT. KALAVATI AND OTHERS

Appearance:
Shri N.S. Tomar - Advocate for appellant/Insurance Company.
None for respondents.

WITH
MISC. APPEAL No. 785 of 2016
CHOLAMANDLAM MS GENERAL INSURANCE CO.LTD.
Versus
SMT. SUKHDEVI @ SUKHI AND OTHERS

Appearance:
Shri N.S. Tomar - Advocate for appellant.
Shri R.P. Gupta - Advocate for respondents No.1 to 3.

ORDER

1. Heard through video conferencing.

2. I.A. No.3771/2016 has been filed in M.A.No.783/2016, I.A.

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No.3762/2016 has been filed in M.A. No.784/2016, I.A. No.3766/2016 has been filed in C.R. No.81/2016, and I.A. No.3768/2016 has been filed in C.R. No.82/2016. These are applications for condonation of delay in filing the miscellaneous appeals and civil revisions.

3. A similar application, i.e., I.A. No.3764/2016, was filed in M.A. No.785/2016, and this Court by order dated 16/05/2019 passed in M.A. No.785/2016 has allowed the said I.A. and has condoned the delay. No distinguishable features could be pointed out by counsel appearing for respondents/claimants so as to take a different view. Accordingly, the aforesaid I.As. are hereby allowed and the delay in filing M.A. No.783/2016, M.A. No.784/2016, C.R. No.81/2016 and C.R. No.82/2016 is hereby condoned.

4. By this common order, all the miscellaneous appeals and civil revisions shall be decided because they are arising out of the common award dated 12.02.2016 passed by the Member, Second MACT Gohad.

5. M.A. No.783/2016 has been filed against the award passed in Claim Case No.54/2014. M.A. No.784/2016 has been filed against the award passed in Claim Case No.09/2014. M.A. No.785/2016 has been filed against the award passed in Claim Case No.11/2014. Civil Revision 81/2016 has been filed against the award passed in Claim Case No.10/2014, and Civil Revision No.82/2016 has been filed against the award passed in Claim Case No.8/2014.

6. A solitary ground has been raised by counsel for appellant/applicant/Insurance Company that although the Claims Tribunal has found that there was a violation of the insurance policy, but has applied the principle of pay and recover.

7. Since the factum of accident has not been disputed, therefore, it is suffice to mention here that on 16/3/2012 at about 9:00 a.m., Tata 407 bearing registration number M.P.30 G.0633 turned turtle. As a result, Santosh Kushwaha,

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Balwant Singh, and Gyan Singh died, and Phool Singh and Dharmendra sustained injuries. Accordingly, the injured persons and the legal representatives of the deceased persons filed different claim petitions, which have been decided by the common order.

8. The Claims Tribunal has come to the conclusion that since the deceased and injured were traveling in a goods vehicle, therefore, there is a violation of the insurance policy, and accordingly, the Insurance Company has been exonerated. But after exonerating the Insurance Company, the Claims Tribunal has applied the principle of pay and recover and has held that the Insurance Company can recover the amount from the owner and driver after making payment of the compensation amount.

9. It is the contention of counsel for the appellant/applicant/Insurance Company that once the terms and conditions of the insurance policy were found to have been violated, then the Claims Tribunal should not have applied the principle of pay and recover.

10. Per contra, Shri Gupta has supported the findings recorded by the Claims Tribunal.

11. Heard learned counsel appearing for the parties.

12. This Court, in the case of Cholamandalam Ms General Insurance Company Limited Registered Office Hari Nivas Towers Vs. Munni Bai and Others, decided on 11.03.2025 in M.A. No.5819/2024 has held as under :-

This Miscellaneous Appeal, under Section 173 of the Motor Vehicles Act, (for brevity "the Act") has been filed against Award dated 02.05.2024 passed by Member, Motor Accident Claims Tribunal, Guna (M.P.) in M.A.C.C. No.140/2023.

2. A solitary ground was raised by counsel for the Insurance Company that although the Insurance Company has been exonerated on the ground that the offending vehicle was being driven in violation of the terms and conditions of the insurance policy as the driver of the vehicle was not

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having valid and effective licence, but the Claims Tribunal has applied the principle of pay and recover. It is submitted that the principle of pay and recover came into force for the first time after the judgment was passed by the Supreme Court in the case of National Insurance Company Limited versus Swaran Singh and others reported in 2004 ACJ 1. Thereafter, Section 149 was renumbered as Section 150 of the Act. It is submitted that earlier proviso to sub-section 4 of Section 149 and sub-section 5 provided for the concept of pay and recover. However, after amendment, the proviso to sub-section 4 and sub-section 5 of Section 150 of the Act have been omitted. Thus, in view of changed scenario, the judgment passed by the Supreme Court in the case of Swaran Singh (supra) does not hold good, and thus, where the Insurance Company is exonerated from its liability on the ground of violation of the terms and conditions of the insurance policy, then the principle of pay and recover cannot be applied.

3. Per contra, appeal is vehemently opposed by counsel for the respondents.

4. Section 149 of the Act, which was earlier in existence, reads as under:-

149. Duty of insurers to satisfy judgments and awards against persons insured in respect of third party risks.--(1) If, after a certificate of insurance has been issued under sub-section (3) of section 147 in favour of the person by whom a policy has been effected, judgment or award in respect of any such liability as is required to be covered by a policy under clause (b) of sub-section (1) of section 147 (being a liability covered by the terms of the policy) 1 [or under the provisions of section 163A] is obtained against any person insured by the policy, then, notwithstanding that the insurer may be entitled to avoid or cancel or may have avoided or cancelled the policy, the insurer shall, subject to the provisions of this section, pay to the person entitled to the benefit of the decree any sum not exceeding the sum assured payable thereunder, as if he were the judgment debtor, in respect of the liability, together with any amount payable in respect of costs and any sum payable in respect of interest on that sum by virtue of any enactment relating to interest on judgments.

(2) No sum shall be payable by an insurer under sub-section (1) in respect of any judgment or award unless, before the commencement of the proceedings in which the judgment or award is given the insurer had notice through the Court or, as the case may be, the Claims Tribunal of the bringing of the

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proceedings, or in respect of such judgment or award so long as execution is stayed thereon pending an appeal; and an insurer to whom notice of the bringing of any such proceedings is so given shall be entitled to be made a party thereto and to defend the action on any of the following grounds, namely:--

(a) that there has been a breach of a specified condition of the policy, being one of the following conditions, namely:

--

(i) a condition excluding the use of the vehicle--

(a) for hire or reward, where the vehicle is on the date of the contract of insurance a vehicle not covered by a permit to ply for hire or reward, or

(b) for organised racing and speed testing, or

(c) for a purpose not allowed by the permit under which the vehicle is used, where the vehicle is a transport vehicle, or

(d) without side-car being attached where the vehicle is a motor cycle; or

(ii) a condition excluding driving by a named person or persons or by any person who is not duly licensed, or by any person who has been disqualified for holding or obtaining a driving licence during the period of disqualification; or

(iii) a condition excluding liability for injury caused or contributed to by conditions of war, civil war, riot or civil commotion; or

(b) that the policy is void on the ground that it was obtained by the non-disclosure of a material fact or by a representation of fact which was false in some material particular.

(3) Where any such judgment as is referred to in sub-section (1) is obtained from a Court in a reciprocating country and in the case of a foreign judgment is, by virtue of the provisions of section 13 of the Code of Civil Procedure, 1908 (5 of 1908) conclusive as to any matter adjudicated upon by it, the insurer (being an insurer registered under the Insurance Act, 1938 (4 of 1938) and whether or not he is registered under the corresponding law of the reciprocating country) shall be liable to the person entitled to the benefit of the decree in the manner and

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to the extent specified in sub-section (1), as if the judgment were given by a Court in India:

Provided that no sum shall be payable by the insurer in respect of any such judgment unless, before the commencement of the proceedings in which the judgment is given, the insurer had notice through the Court concerned of the bringing of the proceedings and the insurer to whom notice is so given is entitled under the corresponding law of the reciprocating country, to be made a party to the proceedings and to defend the action on grounds similar to those specified in sub-section (2).

(4) Where a certificate of insurance has been issued under sub-

section (3) of section 147 to the person by whom a policy has been effected, so much of the policy as purports to restrict the insurance of the persons insured thereby by reference to any conditions other than those in clause (b) of sub-section (2) shall, as respects such liabilities as are required to be covered by a policy under clause (b) of sub-section (1) of section 147, be of no effect:

Provided that any sum paid by the insurer in or towards the discharge of any liability of any person which is covered by the policy by virtue only of this sub-section shall be recoverable by the insurer from that person.

(5) If the amount which an insurer becomes liable under this section to pay in respect of a liability incurred by a person insured by a policy exceeds the amount for which the insurer would apart from the provisions of this section be liable under the policy in respect of that liability, the insurer shall be entitled to recover the excess from that person.

(6) In this section the expressions "material fact" and "material particular" means, respectively a fact or particular of such a nature as to influence the judgment of a prudent insurer in determining whether he will take the risk and, if so at what premium and on what conditions and the expression "liability covered by the terms of the policy" means a liability which is covered by the policy or which would be so covered but for the

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fact that the insurer is entitled to avoid or cancel or has avoided or cancelled the policy.

(7) No insurer to whom the notice referred to in sub-section (2) or sub-section (3) has been given shall be entitled to avoid his liability to any person entitled to the benefit of any such judgment or award as is referred to in sub-section (1) or in such judgment as is referred to in sub-section (3) otherwise than in the manner provided for in sub-section (2) or in the corresponding law of the reciprocating country, as the case may be.

Explanation.--For the purpose of this section, "Claims Tribunal"

means a Claims Tribunal constituted under section 165 and "award" means an award made by that Tribunal under section

168."

(Emphasis supplied)

5. Thereafter, Section 149 of the Act was renumbered as Section 150 of the Act, which reads as under:

150. Duty of insurers to satisfy judgments and awards against persons insured in respect of third party risks. - (1) If, after a certificate of insurance has been issued under sub-section (3) of section 147 in favour of the person by whom a policy has been effected, judgment or award in respect of any such liability as is required to be covered by a policy under clause (b) of sub-section (1) of section 147 (being a liability covered by the terms of the policy) or under the provisions of section 164 is obtained against any person insured by the policy, then, notwithstanding that the insurer may be entitled to avoid or cancel or may have avoided or cancelled the policy, the insurer shall, subject to the provisions of this section, pay to the person entitled to the benefit of the award any sum not exceeding the sum assured payable thereunder, as if that person were the decree holder, in respect of the liability, together with any amount payable in respect of costs and any sum payable in respect of interest on that sum by virtue of any enactment relating to interest on judgments.

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case may be, the Claims Tribunal of the bringing of the proceedings, or in respect of such judgment or award so long as its execution is stayed pending an appeal; and an insurer to whom notice of the bringing of any such proceedings is so given shall be entitled to be made a party thereto, and to defend the action on any of the following grounds, namely: -

(a) that there has been a breach of a specified condition of the policy, being one of the following conditions, namely:-

(i) a condition excluding the use of the vehicle -

(A) for hire or reward, where the vehicle is on the date of the contract of insurance a vehicle not covered by a permit to ply for hire or reward; or (B) for organised racing and speed testing; or (C) for a purpose not allowed by the permit under which the vehicle is used, where the vehicle is a transport vehicle; or (D) without side-car being attached where the vehicle is a two-wheeled vehicle; or

(ii) a condition excluding driving by a named person or by any person who is not duly licenced or by any person who has been disqualified for holding or obtaining a driving licence during the period of disqualification or driving under the influence of alcohol or drugs as laid down in section 185; or

(iii) a condition excluding liability for injury caused or contributed to by conditions of war, civil war, riot or civil commotion; or

(b) that the policy is void on the ground that it was obtained by nondisclosure of any material fact or by representation of any fact which was false in some material particular; or

(c) that there is non-receipt of premium as required under section 64VB of the Insurance Act, 1938 (4 of 1938). (3) Where any such judgment or award as is referred to in sub-

section (1) is obtained from a court in a reciprocating country and in the case of a foreign judgment is, by virtue of the provisions of section 13 of the Code of Civil Procedure, 1908 conclusive as to

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any matter adjudicated upon by it, the insurer (being an insurer registered under the Insurance Act, 1938 and whether or not that person is registered under the corresponding law of the reciprocating country) shall be liable to the person entitled to the benefit of the decree in the manner and to the extent specified in sub-section (1), as if the judgment or award were given by a court in India:

Provided that no sum shall be payable by the insurer in respect of any such judgment or award unless, before the commencement of the proceedings in which the judgment or award is given, the insurer had notice through the court concerned of the bringing of the proceedings and the insurer to whom notice is so given is entitled under the corresponding law of the reciprocating country, to be made a party to the proceedings and to defend the action on grounds similar to those specified in sub-section (2). (4) Where a certificate of insurance has been issued under sub-

section (3) of section 147 to the person by whom a policy has been effected, so much of the policy as purports to restrict the insurance of the persons insured thereby, by reference to any condition other than those in sub-section (2) shall, as respects such liabilities as are required to be covered by a policy under clause (b) of sub-section (1) of section 147, be of no effect. (5) No insurer to whom the notice referred to in sub-section (2) or sub-section (3) has been given shall be entitled to avoid his liability to any person entitled to the benefit of any such judgment or award as is referred to in sub-section (1) or in such judgment as is referred to in sub-section (3) otherwise than in the manner provided for in sub-section (2) or in the corresponding law of the reciprocating country, as the case may be.

(6) If on the date of filing of any claim, the claimant is not aware of the insurance company with which the vehicle had been insured, it shall be the duty of the owner of the vehicle to furnish to the tribunal or court the information as to whether the vehicle had been insured on the date of the accident, and if so, the name of the insurance company with which it is insured. Explanation. - For the purposes of this section, -

(a) "award" means an award made by the Claims Tribunal under section 168;

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(b) "Claims Tribunal" means a Claims Tribunal constituted under section 165;

(c) "liability covered by the terms of the policy" means the liability which is covered by the policy or which would be so covered but for the fact that the insurer is entitled to avoid or cancel or has avoided or cancelled the policy; and

(d) "material fact" and "material particular" mean, respectively, a fact or particular of such a nature as to influence the judgment of a prudent insurer in determining whether he shall take the risk and, if so, at what premium and on what conditions.

6. On comparison of both the sections, it is clear that the proviso to sub-section 4 and sub-section 5 of Section 149 of the Act have been omitted and are no more part of Section 150.

7. Now, the only question for consideration is as to what is the effect of omission of proviso to sub-section 4 and sub-section 5 of Section 149 of the Act.

The Supreme Court in the case of Swaran Singh (supra) has held as under:

102. 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, 1988 providing 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., 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

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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 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

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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.

(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.

(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."

It is clear from paragraph 102 (x) that Supreme Court in the case of Swaran Singh (supra) has held that where, on adjudication of the claim, the Tribunal comes to the conclusion that the insurer has satisfactorily proved its defence, then the Tribunal can also direct that the insurer is

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liable to be reimbursed by the insured for the compensation and other amounts which it has been compelled to pay to the third party. Similarly, paragraph 102 (xi) provides that the provisions contained in sub-section 4 with the proviso thereunder and sub-section 5 are intended to cover specified contingencies mentioned therein to enable the insurer to recover the amount. If the insurance company is held jointly and severally liable, then there is no question of the application of paragraph 102 (x) of the judgment passed in the case of Swaran Singh (supra). Therefore, it is clear that Para 102(x) would apply where the insurer has successfully proved its defence.

8. So far as Section 149 (5) is concerned, it is with regard to the extent of liability, and the present case is not covered by the erstwhile provision of Section 149 (5) of the Act. Proviso to sub-section 4 of Section 149 had given authority to the insurer to recover the compensation from the insured if any compensation amount is paid. However, in the present case, the insurance company has been exonerated from the liability on the ground of violation of terms and conditions of the insurance policy. The insurance policy is a statutory contract entered into between the insurer and the insured for the benefit of the third party. If the insured has violated the conditions of the insurance policy, it is a matter between the insurer and the insured, and the third party cannot be made to suffer by going for execution against a private person instead of the insurer. Therefore, in considered opinion of this Court, paragraph 102 (x) of the judgment in the case of Swaran Singh (supra) would apply even if the proviso to sub- section 4 and sub-section 5 of Section 149 of Act has been omitted, and that has not brought any difference in the application of the principle of pay and recover.

9. No other argument is advanced by counsel for appellant.

10. The appeal fails and is hereby dismissed."

13. Thus, it is clear that even after the amendment in the provisions of the Motor Vehicles Act, still the Claims Tribunal can apply the principle of pay and recover. In the present case, the terms and conditions of the insurance policy were found to have been violated. Although insurance is a statutory contract, but it is between the insured and the insurer. The persons who died in the accident or who suffered injuries in the accident can be said to be third parties because there

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was no privity of contract between the insurer as well as the persons who lost their lives or persons who sustained injuries.

14. Under these circumstances, this Court is of the considered opinion that if the terms and conditions of the insurance policy were violated, then it will give cause of action to the insurance company to recover the compensation amount from the insured. However, the persons who were not parties to the contract cannot be made to suffer on account of the violation of the terms and conditions of the insurance policy.

15. Accordingly, in light of the judgment passed by this Court in the case of Cholamandalam Ms General Insurance Company Limited Registered Office Hari Nivas Towers (Supra), this Court is of the considered opinion that no case is made out warranting interference.

16. Accordingly, the award dated 12.02.2016 passed by Member, Second MACT, Gohad in Claim Case Nos.54/2014, 09/2014, 11/2014, 10/2014, and 08/2014 is hereby affirmed

17. These miscellaneous appeals and civil revisions are hereby dismissed.

(G.S. Ahluwalia) Judge Aman