REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 5901 of 2011
[Arising out of S.L.P. (C) No.1969 of 2008]
Uttar Pradesh State Road Transport Corporation ...Appellant
Versus
Kulsum & Ors.
...Respondents
W I T H
C.A.No.5902/2011[Arising out of SLP(C) No.1966 of 2008];
C.A.No.5903/2011[Arising out of SLP(C) No.1964 of 2008];
C.A.No.5904/2011[Arising out of SLP(C) No.1970 of 2008];
C.A.No.5905/2011[Arising out of SLP(C) No.2746 of 2008];
C.A.No.5906/2011[Arising out of SLP(C) No.3086 of 2008];
A N D
C.A.No.5907/2011[Arising out of SLP(C) No.27075 of 2008]
J U D G M E N T
Deepak Verma, J.
1. Leave granted.
2. Since common questions of law and facts are involved in
this batch of appeals, six of which have been filed by
Uttar Pradesh State Road Transport Corporation,
C.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)
2
(hereinafter referred to as 'Corporation'), and one has
been preferred by Insurance Company, against the
identical judgments and orders passed by High Court of
Allahabad, it is proposed to dispose of the same by this
common judgment. For the sake of brevity and
convenience, facts of appeal arising out of
S.L.P.(C)No.1969 of 2008 have been taken into
consideration.
3. The Appellant herein (UPSRTC) had challenged the award
passed by Motor Accident Claims Tribunal (hereinafter
referred to as the 'MACT'), Barabanki in claim case
therein, holding the Appellant - Corporation along with
Ajai Vishen and Narottam, owner and driver of the mini
bus, respectively, liable to pay compensation to the
claimants.
4. In appeal before the High Court of Allahabad, it awarded
compensation to the claimants vide impugned judgment and
order dated 12.04.2007, recording the findings against
the Appellant. The question of law that arises for
consideration in the instant and connected appeals is
formulated as under:
C.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)
3
If insured vehicle (in this case a mini bus) is plying
under an Agreement of Contract with the Corporation, on
the route as per permit granted in favour of the
Corporation, in case of an accident, whether the Insurance
Company would be liable to pay compensation or would it be
the responsibility of the Corporation or the owner?
5. Since it is a vexed question, with no unanimity in the
judgments of various High Courts and as it has not been
considered directly so far by this Court, we deem it fit
and appropriate to do so.
6. Thumbnail sketch of the facts is mentioned
hereinbelow:-
Ajai Vishen, the owner of mini bus, bearing
Registration No. UP 32T/7344 entered into an Agreement of
Contract with the Corporation on 07.08.1997 for allowing
it to ply mini bus, as per the permit issued in favour of
Corporation, by the concerned Road Transport Office
(R.T.O.). On account of State amendment incorporated in
Section 103 of the Motor Vehicles Act, 1988 (hereinafter
called 'the Act') vide Uttar Pradesh Amendment Act 5 of
1993; the Corporation is vested with right to take the
C.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)
4
vehicles on hire as per the contract and to ply the same
on the routes as per the permit granted to it. According
to the terms and conditions of the Agreement, the mini bus
was to be plied by the Corporation, on the routes as per
the permit issued by R.T.O. in its favour. Except for
the services of the driver, which were to be provided by
the owner, all other rights of owner were to be exercised
by the Corporation only. The conductor was to be an
employee of the Corporation, and he was authorised and
entitled to collect money after issuing tickets to the
passengers and had the duty to perform all the incidental
and connected activities as a conductor on behalf of the
Corporation. The collection so made was to be deposited
with the Corporation.
7. While the mini bus was running on the specified route
on 13.06.1998, at about 9.00 a.m., Vijay Pal Singh
(deceased), along with his minor children namely, Km. Rupa
(deceased), Rohit (deceased) and Km. Laxmi (deceased), was
present near Gumti shop of a Barber at the side of National
Highway, near Swastic Biscuit Factory, Police Chauki
Mohammadpur, Post Safedabad, District Barabanki.
C.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)
5
8. The Mini Bus, plying under the contract of the
Corporation, driven by Narottam, suddenly rammed into the
Gumti causing injuries to Vijay Pal, his children and also
to the Barber- Majeed, owner of the Gumti shop. On account
of severe bodily injuries suffered by them, they died.
9. Smt. Lallan Devi, w/o deceased Vijay Pal Singh and
mother of the three deceased children filed four claim
petitions claiming compensation. Smt. Kulsum w/o deceased
Majeed, filed a separate claim petition for awarding
compensation for death of Majeed in the said accident
before the aforesaid M.A.C.T.
10. Although, all the above five claim petitions were
allowed and different amounts of compensation were
awarded by the Tribunal alongwith interest @ 12% per annum
but, relying on a judgment of this Court in the case of
Rajasthan State Road Transport Corporation Versus Kailash
Nath Kothari and others reported in (1997) 7 SCC 481, the
liability of payment has been fastened on the Corporation
as, at the time of accident, the offending vehicle, i.e.,
the mini bus was being run by it under the contract.
11. Feeling aggrieved by the awards of the Tribunal,
C.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)
6
Corporation preferred appeals and the owner of the bus,
Ajai Vishan, filed cross objection against the finding on
issue No. 4 recorded by the Tribunal, holding therein that
Insurance Company was not liable to make payment and
fastening the liability on the owner also, on account of
alleged breach of Insurance Policy. However, it had a
caveat that liability of the owner would arise only in
case the Corporation fails to make the payment. The
National Insurance Company Ltd., with which admittedly the
said bus was insured for the relevant period, has been
exonerated from payment of any compensation. Hence, the
appeals.
12. We have accordingly heard Ms. Garima Prashad, Mr.
Laxmibai Leitanthem, Mr. Pradeep Kumar, and Mr. Shadab
Khan, learned counsel for Appellant, Mr. Kishore Rawat,
learned counsel for the Respondent Insurance Company and
Mr. J.P. Dhanda, Mr. Rajeev Mishra for Ajai Vishen, owner
of the Mini Bus and perused the records.
13. However, before we proceed to decide the question
formulated hereinabove, it is necessary to look into some
of the provisions of the Act. Section 2 (30) of the Act
C.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)
7
defines the `owner':
"Owner" means a person in whose name
a motor vehicle stands registered, and
where such person is a minor, the
guardian of such minor, and in relation
to a motor vehicle which is the subject
of a hire-purchase agreement, or an
agreement of lease or an agreement of
hypothecation, the person in possession
of the vehicle under that agreement."
14. Section 103 of the Act deals with the provision of
issue of permits to State Transport Undertakings. However,
vide Uttar Pradesh Amendment Act 5 of 1993, following
sub-Section (1A) was inserted after sub-section (1)
thereof, w.e.f. 16.1.1993 reproduced hereinbelow:
"(1A) It shall be lawful for a State
transport undertaking to operate on any
route as stage carriage, under any permit
issued therefor to such undertaking under
sub-section (1), any vehicle placed at
the disposal and under the control of
such undertaking by the owner of such
vehicle under any arrangement entered
into between such owner and the
undertaking for the use of the said
vehicle by the undertaking."
15. By virtue of the aforesaid incorporated sub-section
(1A) to Section 103 of the Act, the Corporation became
entitled to hire any vehicle which could be plied on any
C.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)
8
route for which permit had been issued by the Transport
Authority in its favour.
16. Chapter XI of the Act deals with the provisions of
insurance of Motor Vehicles against third party risks.
Relevant Portions of sections 146 and 147 thereof are
reproduced hereinbelow:
"146. Necessity for insurance against
third party risk.-(1) No person shall
use, except as a passenger, or cause or
allow any other person to use, a motor
vehicle in a public place, unless there
is in force in relation to the use of
the vehicle by that person or that
other person, as the case may be, a
policy of insurance complying with the
requirements of this Chapter :
... ... ..."
147. Requirement of policies and limits
of liability. -(1) In order to comply
with the requirements of this Chapter,
a policy of insurance must be a policy
which -
(a) is issued by a person who is an
authorised insurer; and
(b) insures the person or classes of
persons specified in the policy to the
extent specified in sub - section (2) -
(i)against any liability which may be
incurred by him in respect of the
C.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)
9
death of or bodily injury to any
person, including owner of the goods
or his authorised representative
carried in the vehicle or damage to
any property of a third party caused
by or arising out of the use of the
vehicle in a public place;
(ii)against the death of or bodily
injury to any passenger of a public
service vehicle caused by or arising
out of the use of the vehicle in a
public place;
Provided that a policy shall not be
required -
(i)......
(ii)to cover any contractual liability.
Explanation. - For the removal of
doubts, it is hereby declared that the
death of or bodily injury to any person
or damage to any property of a third
party shall be deemed to have been
caused by or to have arisen out of, the
use of a vehicle in a public place
notwithstanding that the person who is
dead or injured or the property which
is damaged was not in a public place at
the time of the accident, if the act or
omission which led to the accident
occurred in a public place.
(2)Subject to the proviso to sub-
section (1), a policy of insurance
referred to in sub-section (1), shall
cover any liability incurred in
respect of any accident, up to the
following limits, namely :-
C.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)
10
(a) save as provided in clause (b),
the amount of liability incurred.
(b) in respect of damage to any property
of a third party, a limit of rupees six
thousand :
... ... ..."
17.Section 149 of the Act casts a duty on the insurer to
satisfy the judgment and award against persons insured
in respect of third party risks. Section 157 of the Act
deals with Transfer of Certificate of Insurance,
reproduced hereinbelow:
"157. Transfer of certificate of
insurance.- (1) Where a person in whose
favour the certificate of insurance has
been issued in accordance with the
provisions of this Chapter transfers to
another person the ownership of the motor
vehicle in respect of which such
insurance was taken together with the
policy of insurance relating thereto, the
certificate of insurance and the policy
described in the certificate shall be
deemed to have been transferred in favour
of the person to whom the motor vehicle
is transferred with effect from the date
of its transfer.
[Explanation. - For the removal of
doubts, it is hereby declared that such
deemed transfer shall include transfer of
rights and liabilities of the said
certificate of insurance and policy of
C.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)
11
insurance.]
(2)The transferee shall apply within
fourteen days from the date of transfer
in the prescribed form to the insurer
for making necessary changes in regard
to the fact of transfer in the
certificate of insurance and the policy
described in the certificate in his
favour and the insurer shall make the
necessary changes in the certificate
and the policy of insurance in regard
to the transfer of insurance."
18. It is relevant to mention here that under Section 196
of the Act, Insurance of vehicle is mandatory and
compulsory, otherwise it exposes the driver and owner to
criminal liability.
19. In the light of the aforesaid provisions of the Act,
we shall now consider various judgments of this Court and
High Courts to reach our conclusion.
20. Even though several judgments have been cited by both
sides, but the question which arises in the instant case
is unique in nature and we would answer the same taking
cue and help of the various judgments of this Court and
High Courts.
21. In the matter of Kailash Nath Kothari and others
(supra), a question had arisen with regard to the
C.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)
12
liability of Insurance Company, where the bus plied as per
the contract with Rajasthan State Road Transport
Corporation. However, the said case was dealing with
earlier Motor Vehicle Act of 1939. Taking into
consideration the definition of `owner' as it existed then
in Section 2 (19) of the old Act, it has been held in para
17 as under:
"17. The definition of owner under Section
2(19) of the Act is not exhaustive. It
has, therefore to be construed, in a wider
sense, in the facts and circumstances of a
given case. The expression owner must
include, in a given case, the person who
has the actual possession and control of
the vehicle and under whose directions and
commands the driver is obliged to operate
the bus. To confine the meaning of
"owner" to the registered owner only would
in a case where the vehicle is in the
actual possession and control of the hirer
not be proper for the purpose of fastening
of liability in case of an accident. The
liability of the "owner" is vicarious for
the tort committed by its employee during
the course of his employment and it would
be a question of fact in each case as to
on whom can vicarious liability be
fastened in the case of an accident. In
this case, Shri Sanjay Kumar, the owner of
the bus could not ply the bus on the
particular route for which he had no
permit and he in fact was not plying the
bus on that route. The services of the
driver were transferred along with
C.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)
13
complete "control" to RSRTC, under whose
directions, instructions and command the
driver was to ply or not to ply the ill-
fated bus on the fateful day. The
passengers were being carried by RSRTC on
receiving fare from them. Shri Sanjay
Kumar was therefore not concerned with the
passengers travelling in that bus on the
particular route on payment of fare to
RSRTC. Driver of the bus, even though an
employee of the owner, was at the relevant
time performing his duties under the order
and command of the conductor of RSRTC for
operation of the bus. So far as the
passengers of the ill-fated bus are
concerned, their privity of contract was
only with the RSRTC to whom they had paid
the fare for travelling in that bus and
their safety therefore became the
responsibility of the RSRTC while
travelling in the bus. They had no
privity of contract with Shri Sanjay
Kumar, the owner of the bus at all. Had
it been a case only of transfer of
services of the driver and not of transfer
of control of the driver from the owner to
RSRTC, the matter may have been somewhat
different. But on facts in this case and
in view of Conditions 4 to 7 of agreement,
(supra), the RSRTC must be held to be
vicariously liable for the tort committed
by the driver while plying the bus under
contract of the RSRTC. The general
proposition of law and the presumption
arising therefrom that an employer, that
is the person who has the right to hire
and fire the employee, is generally
responsible vicariously for the tort
committed by the employee concerned
during the course of his employment an
within the scope of his authority, is a
C.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)
14
rebuttable presumption."
22. In the light of the aforesaid judgment, learned
counsel for Respondent Insurance Company, Mr. Kishore
Rawat, strenuously contended before us that the question
has already been answered against the Appellant -
Corporation, thus, nothing survives in this and the
connected appeals filed by the Corporation.
23. In our considered opinion, in the light of drastic
and distinct changes incorporated in the definition of
`owner' in the old Act and the present Act, Kailash
Nath's case (supra) has no application to the facts of
this case.
24. However, we were unable to persuade ourselves with
the specific question which arose in this and connected
appeals as the question projected in these appeals was
neither directly nor substantially in issue, in Kailash
Nath's case (supra). Thus, reference to the same may not
be of much help to us. Admittedly, in the said case,
this Court was dealing with regard to earlier definition
of owner as found in Section 2 (19) of the old Act.
C.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)
15
25. Section 2 (19) of Motor Vehicles Act, 1939 is
reproduced hereinbelow:
"2(19) `owner' means, where the person
in possession of a motor vehicle is a
minor, the guardian of such minor, and in
relation to a motor vehicle which is the
subject of a hire-purchase agreement, the
person in possession of the vehicle under
that Agreement."
26. Critical examination of both the definitions of the
`owner', would show that it underwent a drastic change in
the Act of 1988, already reproduced hereinabove.
27. In our considered opinion, in the light of the
distinct changes incorporated in the definition of
`owner' in the old Act and present Act, Kailash Nath
Kothari's case shall have no application to the facts of
this case.
28. Before we proceed further to decide the aforesaid
question of law, it is necessary to refer to some of the
relevant clauses in the Agreement entered into between
the Appellant and the owner of the vehicle on 07.08.1997.
In the said Agreement, the Appellant has been referred to
as the `First Party' and owner Ajay Vishen has been
referred to as 'Second Party'.
C.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)
16
Relevant clauses 2.1, 3.2, 4.2, 4.3 and 4.4 of
Annexure P-2 are reproduced hereinbelow:
"2.1 The Second Party shall be liable
and responsible to discharge all the legal
liabilities under the Motor Vehicle Act,
1988 or any other Acts, Registration,
payment of taxes of the vehicle,
Comprehensive Insurance and all such
liabilities as may be fixed from time to
time by any law on the owner of vehicle
and the First Party shall be deemed to
have no liability whatsoever.
3.2 The driver shall remain and shall
be deemed to be the employee of Second
Party. That driver shall not under any
circumstances be treated as employee of
First Party. The Second Party shall be
fully liable to procure driving licence,
etc. and to meet all other legal
requirements under Motor Vehicle Act 1988
or any other Act.
4.2 The driver of the bus under
contract will drive the bus carefully. He
shall stop the bus at every designated
spot to enable passenger to board/get down
from the bus and shall get in-out entries
of the bus recorded wherever required.
Driver of Bus shall ensure that tickets
are issued to all the passengers and only
after that would drive the bus at its next
destination.
4.3 Bus driver shall not himself sell
the tickets but this restriction shall not
be applicable in the circumstances
mentioned in clause-31 of the agreement.
C.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)
17
4.4 The conductor appointed and
deputed by the First Party shall have
total responsibility for issuing tickets
to the passengers, receiving fare and
completing various papers/ records in this
regard. The First Party shall
appoint/depute the conductors."
29. Critical examination thereof would show that the
Appellant and the owner had specifically agreed that the
vehicle will be insured and a driver would be provided by
owner of the vehicle but overall control, not only on the
vehicle but also on the driver, would be that of the
Corporation. Thus, the vehicle was given on hire by the
owner of the vehicle together with its existing and
running insurance policy. In view of the aforesaid terms
and conditions, the Insurance Company cannot escape its
liability to pay the amount of compensation. There is no
denial of the fact by the insurance company that at the
relevant point of time the vehicle in question was
insured with it and the policy was very much in force and
in existence. It is also not the case of the insurance
company that the driver of the vehicle was not holding a
valid driving licence to drive the vehicle. The Tribunal
has also held that the driver had a valid driving licence
C.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)
18
at the time of accident. It has also not been contended
by it that there has been violation of the terms and
conditions of the policy or that the driver was not
entitled to drive the said vehicle.
30. During the course of hearing, we had asked the
following pertinent questions to Mr. Kishore Rawat,
learned counsel for the Insurance Company:
i) Since the Insurance Company had admittedly
received the amount of premium for the period when the
mini bus had met with the accident then why should it not
be made liable to make the payment of compensation?
According to him, in normal circumstances, if the said
vehicle would not have been attached with the Corporation
for being plied by it on the route of permit granted to
it, then of course, the Insurance Company would have no
option but to make the payment.
ii) We had also enquired if there exists different
tariffs of premium for the vehicle insured at the
instance of owner or for the vehicle which is being
attached with the Corporation for being plied by it. He
categorically admitted that there is no such difference
C.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)
19
in the tariff in either of the aforesaid situation and it
is same for both.
iii) We further enquired from him that if an
intimation would have been given to the Insurance Company
that the vehicle is being attached with the Corporation
then what would have been the position? He again
informed us that in that case, the Insurance Company
would have met the liability of compensation, in case of
an accident.
(iv) Lastly, we enquired from him as to under which
provision of the Act or the Rule, any statutory duty or
otherwise is cast on the owner to seek permission or give
an intimation to the Insurance Company in case the
vehicle is attached with the Corporation for being plied
by it? He candidly conceded that there is neither any
statutory duty cast on the owner under the Act or under
any Rules to seek permission from the Insurance Company
nor it is under any of the orders issued by the Company.
According to him, it would have been desirable for the
insured to have informed about such a contract.
31. Thus, in the light of the aforesaid, it is clear
C.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)
20
that Insurance Company is trying to evade its liability
on flimsy grounds or under misconception of law.
32. On account of the aforesaid discussions, it is
crystal clear that actual possession of the vehicle was
with the Corporation. The vehicle, driver and the
conductor were under the direct control and supervision
of the Corporation.
33. Black's Law Dictionary defines "Vicarious
Liability" as follows:
"Liability that a supervisory party
(such as an employer) bears for the
actionable conduct of a subordinate or
associate (such as an employee) because
of the relationship between the two
parties". (Page 927, Black's Law
Dictionary, 7th Edition)."
34. So, through the above definition, it can be inferred
that the person supervising the driver through the
principle of Respondeat Superior should pay for the
damages of the victim.
35. In the instant case, the driver was employed by Ajay
Vishen, the owner of the bus but evidently through Clause
4.4. of the Agreement, reproduced hereinabove, driver was
supposed to drive the bus under the instructions of
C.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)
21
conductor who was appointed by the Corporation. The said
driver was also bound by all orders of the Corporation.
Thus, it can safely be inferred that effective control
and command of the bus was that of the Appellant.
36. Thus, for all practical purposes, for the relevant
period, the Corporation had become the owner of the
vehicle for the specific period. If the Corporation had
become the owner even for the specific period and the
vehicle having been insured at the instance of original
owner, it will be deemed that the vehicle was transferred
along with the Insurance Policy in existence to the
Corporation and thus Insurance Company would not be able
to escape its liability to pay the amount of
compensation.
37. The liability to pay compensation is based on a
statutory provision. Compulsory Insurance of the vehicle
is meant for the benefit of the Third Parties. The
liability of the owner to have compulsory insurance is
only in regard to Third Party and not to the property.
Once the vehicle is insured, the owner as well as any
other person can use the vehicle with the consent of the
C.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)
22
owner. Section 146 of the Act does not provide that any
person who uses the vehicle independently, a separate
Insurance Policy should be taken. The purpose of
compulsory insurance in the Act has been enacted with an
object to advance social justice.
38. Third Party rights have been considered by this
Court in several judgments and the law on the said
point is now fairly well settled.
39. The Apex Court in the case of Guru Govekar v.
Filomena F. Lobo and Ors. (1988 ACJ 585), 1988 AIR 1332
has held that:
"8. ...Thus, if a policy is taken in
respect of a motor vehicle from an insurer
in compliance with the requirements of
Chapter VIII of the Act, the insurer is
under an obligation to pay the
compensation payable to a third party on
account of any injury to his/her person or
property or payable to the legal
representatives of the third party in case
of death of the third party caused by or
arising out of the use of the vehicle at a
public place. The liability to pay
compensation in respect of death of or
injury caused to the person or property of
a third party undoubtedly arises when such
injury is caused when the insured is using
the vehicle in a public place. It also
arises when the insured has caused or
allowed any other person (including an
C.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)
23
independent contractor) to use his vehicle
in a public place and the death of or
injury to the person or property of a
third party is caused on account of the
use of the said vehicle during such
period, unless such other person has
himself taken out a policy of insurance to
cover the liability arising out of such an
accident.
13. ...This meant that once the insurer
had issued a certificate of insurance in
accordance with sub-section (4) of
Section 95 of the Act the insurer had to
satisfy any decree which a person
receiving injuries from the use of the
vehicle insured had obtained against any
person insured by the policy. He was
liable to satisfy the decree when he had
been served with a notice under sub-
section (2) of Section 96 of the Act
about the proceedings in which the
judgment was delivered.
14. ...Any other view will expose innocent
third parties to go without compensation
when they suffer injury on account of such
motor accidents and will defeat the very
object of introducing the necessity for
taking out insurance policy under the
Act."
40. In a recent judgment of this Court, in the case of
United India Insurance Company Limited v. Santro Devi and
Ors. (2009) 1 SCC 558 it has been held as under :-
"16.The provisions of compulsory insurance
have been framed to advance a social
object. It is in a way part of the social
C.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)
24
justice doctrine. When a certificate of
insurance is issued, in law, the insurance
company is bound to reimburse the owner.
There cannot be any doubt whatsoever that
a contract of insurance must fulfil the
statutory requirements of formation of a
valid contract but in case of a third-
party risk, the question has to be
considered from a different angle.
17.Section 146 provides for statutory
insurance. An insurance is mandatorily
required to be obtained by the person in
charge of or in possession of the
vehicle. There is no provision in the
Motor Vehicles Act that unless the
name(s) of the heirs of the owner of a
vehicle is/are substituted on the
certificate of insurance or in the
certificate of registration in place of
the original owner (since deceased), the
motor vehicle cannot be allowed to be
used in a public place. Thus, in a case
where the owner of a motor vehicle has
expired, although there does not exist
any statutory interdict for the person
in possession of the vehicle to ply the
same on road; but there being a
statutory injunction that the same
cannot be plied unless a policy of
insurance is obtained, we are of the
opinion that the contract of insurance
would be enforceable. It would be so in
a case of this nature as for the purpose
of renewal of insurance policy only the
premium is to be paid. It is not in
dispute that quantum of premium paid for
renewal of the policy is in terms of the
provisions of the Insurance Act, 1938."
C.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)
25
41. Perusal of the ratio of aforesaid judgments of this
Court, shows that Section 146 of the Act gives complete
protection to Third Party in respect of death or bodily
injury or damage to the property while using the vehicle
in public place. For that purpose, insurance of the
vehicle has been made compulsory to the vehicles or to the
owners. This would further reflect that compulsory
insurance is obviously for the benefit of Third Parties.
42. Certificate of Insurance, between the owner and the
Insurance Company contemplates, under what circumstances
Insurance Company would be liable to pay the amount of
compensation. The relevant conditions are reproduced
hereinbelow :
"Rules with respect to use of the Vehicle
Use only for carriage of passengers
in accordance with permit (contract
carriage or stage carriage) issued within
the meaning of the Motor Vehicles Act,
1988. This policy does not cover:
1. Use for organised racing pace making
reliability trial speed testing.
2. Use whilst drawing a trailer except the
towing (other than to reward) of any one
C.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)
26
disabled mechanically propellor vehicle.
Persons who are qualified to use the
Vehicle:
Any person including the insured
provided that person driving holds an
effective driving licence at the time of
the accident and is not disqualified from
holding or obtaining such licence.
Provided also that a person holding an
effective learner's licence may also drive
the vehicle when non used for transport of
passenger at the time of the accident and
such a person satisfies the requirement of
rule No. 3 of this Central Motor Vehicle
Rule, 1989."
43. Perusal thereof would show that there has not been any
violation of the aforesaid terms and conditions of the
policy. Respondent-Insurance Company has also failed to
point out violation of any Act, Rules or conditions of the
Insurance. Insurance Company has no legal justification to
deny the payment of compensation to the claimants.
44. In the light of the foregoing discussions, the Appeal
filed by Insurance Company fails, wherein it has been
directed that the amount would first be paid by the
Company, with right to it to recover the same from owner
of the vehicle. This we hold so, as the liability of the
Insurance Company is exclusive and absolute.
C.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)
27
45. Thus, looking to the matter from every angle, we are
of the considered opinion that Insurance Company cannot
escape its liability of payment of compensation to Third
Parties or claimants. Admittedly, owner of the vehicle has
not violated any of the terms and conditions of the policy
or provisions of the Act. The owner had taken the
insurance so as to meet such type of liability which may
arise on account of use of the vehicle.
46. Apart from the above, learned counsel for Insurance
Company could not point out any legal embargo which may
give right to it to deny the payment of compensation.
Thus, legally or otherwise liability has to be fastened on
the Insurance Company only.
47. In the light of the aforesaid discussion, the Appeals
of the Corporation are allowed. The impugned judgment and
order passed by High Court qua the Corporation are hereby
set aside and quashed and we hold that the Insurance
Company would be liable to pay the amount of compensation
to the claimants.
48. Appeals filed by the Corporation thus stand allowed
and the Appeal filed by the Insurance Company stands
C.A. @ SLP(C)No.1969 of 2008 etc. ...(contd.)
28
dismissed with costs. Counsel's fee quantified at Rs.
10,000/- in each Appeal.
.........................J.
[DALVEER BHANDARI]
.........................J.
[DEEPAK VERMA]
New Delhi
July 25, 2011
