published in http://judis.nic.in/supremecourt/filename=40464
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REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO… 4834 OF 2013
(Arising out of Special Leave Petition (Civil) No.5091 of 2009)
S. IYYAPAN Appellant (s)
VERSUS
M/S UNITED INDIA INSURANCE
COMPANY LTD. AND ANOTHER Respondent(s)
JUDGMENT
M.Y. Eqbal, J.:
Leave granted.
2. The right of the victim of a road accident to claim
compensation is a statutory one.
The Parliament in its
wisdom inserted the relevant provisions in the Motor
Vehicles Act in order to protect the victims of road accident
travelling in the vehicle or using the road and thereby made
it obligatory that no motor vehicle shall be used unless the
vehicle is compulsorily insured against third party risk.
In
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this background,
can an Insurance Company disown its
liability on the ground that the driver of the vehicle although
duly licensed to drive light motor vehicle but there was no
endorsement in the licence to drive light motor vehicle used
as commercial vehicle.
This is the sole question arises for
consideration in this appeal.
3. This appeal by special leave arises in the following
circumstances.
4. On 23.5.1998, at about 8.30 P.M., when the deceased
named Charles was riding his bicycle from east to west and
reached in front of one house, one Sivananayaitha Perumal
(driver of the vehicle who remained ex parte in the
proceedings) came from west to east direction driving a
Mahindra van at high speed and dashed against Charles and
ran away without stopping the vehicle. Charles, who was
admitted in a hospital, succumbed to the injuries sustained
by him. It is evident from the Motor Vehicle Inspector’s
Report that the accident did not occur due to mechanical
defect. On the claim petition filed by deceased’s wife
(respondent No.2 herein), the Motor Accidents Claims
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Tribunal (Principal District Judge) at Kanyakumari (in short,
“Tribunal”), after considering the evidence on record,
awarded a compensation of Rs.2,42,400/- with interest at
12% p.a. from the date of petition – to be paid by the
respondents before the Tribunal jointly and severally. The
Tribunal was of the view that the person possessing licence
to drive light motor vehicle is entitled to drive Mahindra maxi
cab.
5. Insurance company preferred an appeal before the
High Court challenging the judgment and award of the
Tribunal. The Insurance Company did not dispute the
quantum of compensation,
but questioned the liability itself
submitting that the driver of the vehicle was not having a
valid driving licence to drive the vehicle on that day.
Insurance company referred the decisions of this Court in
New India Assurance Company Ltd. v. Prabhu Lal 2008
(1) SCC 696 and Sardari & Ors. v. Sushil Kumar & Ors.
2008 ACJ 1307 and submitted that a person having licence
to drive light motor vehicle is not authorized to drive a
commercial vehicle.
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6. Per contra, on behalf of the claimant, this Court’s
decisions in Ashok Gangadhar Maratha v. Oriental
Insurance Co. Ltd. AIR 1999 SC 3181 and National
Insurance Co. Ltd. v. Annappa Irappa Nesaria alias
Nesaragi and ors., 2008 (3) SCC 464 were referred and it
was contended that a person who is having a licence to drive
light motor vehicle can drive the commercial vehicle also.
7. After hearing the learned counsel on either side and
considering the aforesaid decisions,
the High Court relying
upon Sardari’s case (supra), observed that since the
vehicle was being used as a taxi, which is a commercial
vehicle, the driver of the said vehicle was required to hold an
appropriate licence.
Hence, there being a breach of the
condition of the contract of insurance, the Insurance
Company is not liable to pay any compensation to the
claimant.
The view taken by the High Court is quoted
hereinbelow:-
“It has not been disputed that the
vehicle was being used as a taxi,
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which is a commercial vehicle. The
driver of the said vehicle was required
to hold an appropriate license
therefore. The third respondent
herein, who was driving the said
vehicle at the relevant time, was
holder of a license to drive a light
motor vehicle only. He did not
possess any license to drive a
commercial vehicle. In the present
case, R.W.2 has deposed that the
driver of the vehicle was not having
the license to drive a commercial
vehicle on the date of accident.
Therefore, it is clear that the driver
was not having the driving license to
drive commercial vehicle on the date
of accident. Evidently, therefore,
there was a breach of the condition of
the contract of insurance.
Having
tested the present case in the light of
the Supreme court Judgment in the
case of Sardari and Others v. Sushil Kumar and Others, cited
supra, this court is of the considered
view that, since the driver was not
possessing the driving license to drive
a commercial vehicle, the Insurance
Company is not liable to pay any
compensation to the claimant and the
owner of the vehicle is alone liable to
pay the compensation to the
claimant.”
8. Time and again this Court on various occasions
considered the aim and object of making the insurance
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compulsory before a vehicle is put on the road. Indisputably
a new chapter was inserted in the Motor Vehicles Act only
with an intention of welfare measure to be taken to ensure
and protect the plight of a victim of a road accident. In
Skandia Insurance Co. Ltd. v. Kokilaben
Chandravadan, (1987) 2 SCC 654, this Court observed as
under:-
“13. In order to divine the intention of
the legislature in the course of
interpretation of the relevant provisions
there can scarcely be a better test than
that of probing into the motive and
philosophy of the relevant provisions
keeping in mind the goals to be
achieved by enacting the same.
Ordinarily it is not the concern of the
legislature whether the owner of the
vehicle insures his vehicle or not. If the
vehicle is not insured any legal liability
arising on account of third party risk will
have to be borne by the owner of the
vehicle. Why then has the legislature
insisted on a person using a motor
vehicle in a public place to insure
against third party risk by enacting
Section 94? Surely the obligation has
not been imposed in order to promote
the business of the insurers engaged in
the business of automobile insurance.
The provision has been inserted in order
to protect the members of the
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community travelling in vehicles or
using the roads from the risk attendant
upon the user of motor vehicles on the
roads. The law may provide for
compensation to victims of the
accidents who sustain injuries in the
course of an automobile accident or
compensation to the dependants of the
victims in the case of a fatal accident.
However, such protection would remain
a protection on paper unless there is a
guarantee that the compensation
awarded by the courts would be
recoverable from the persons held liable
for the consequences of the accident. A
court can only pass an award or a
decree. It cannot ensure that such an
award or decree results in the amount
awarded being actually recovered, from
the person held liable who may not have
the resources. The exercise undertaken
by the law courts would then be an
exercise in futility. And the outcome of
the legal proceedings which by the very
nature of things involve the time cost
and money cost invested from the
scarce resources of the community
would make a mockery of the injured
victims, or the dependants of the
deceased victim of the accident, who
themselves are obliged to incur not
inconsiderable expenditure of time,
money and energy in litigation. To
overcome this ugly situation the
legislature has made it obligatory that
no motor vehicle shall be used unless a
third party insurance is in force. To use
the vehicle without the requisite third
party insurance being in force is a penal
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offence. The legislature was also faced
with another problem. The insurance
policy might provide for liability walled
in by conditions which may be specified
in the contract of policy. In order to
make the protection real, the legislature
has also provided that the judgment
obtained shall not be defeated by the
incorporation of exclusion clauses other
than those authorised by Section 96 and
by providing that except and save to the
extent permitted by Section 96 it will be
the obligation of the insurance company
to satisfy the judgment obtained against
the persons insured against third party
risk (vide Section 96). In other words,
the legislature has insisted and made it
incumbent on the user of a motor
vehicle to be armed with an insurance
policy covering third party risks which is
in conformity with the provisions
enacted by the legislature. It is so
provided in order to ensure that the
injured victims of automobile accidents
or the dependants of the victims of fatal
accidents are really compensated in
terms of money and not in terms of
promise. Such a benign provision
enacted by the legislature having regard
to the fact that in the modern age the
use of motor vehicles notwithstanding
the attendant hazards, has become an
inescapable fact of life, has to be
interpreted in a meaningful manner
which serves rather than defeats the
purpose of the legislation. The provision
has therefore to be interpreted in the
twilight of the aforesaid perspective.”
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9. The defence which the insurer is entitled to take in a
case for compensation arising out of the motor vehicles
accident was provided under Section 96 of the old Act which
is now Section 149 of the Act of 1988. Section 149 of the
Motor Vehicles Act, 1988 made it mandatory on the part of
the insurer to satisfy the judgments and awards against
persons insured in respect of third party risk. For better
appreciation, Section 149 is reproduced herein below:-
“(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 (l) of section 147 (being a
liability covered by the terms of the
policy) 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
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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
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
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(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 nondisclosure 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
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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 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 condition
other than those in clause (b) of subsection (2) shall, as respects such
liabilities as are required to be covered
by a policy under clause (b) of subsection (1) of section 147, be of no
effect:
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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). …….
(6). …….”
10. Section 149(2)(a)(ii) gives a right to the insurer to take
a defence that person driving the vehicle at the time of
accident was not duly licensed. In other words, Section
149(2)(a)(ii) puts a condition excluding driving by any
person who is not duly licensed. The question arose before
this Court as to whether the Insurance Company can
repudiate its liability to pay the compensation in respect of
the accident by a vehicle taking a defence that at the
relevant time it was being driven by a person having no
licence. While considering this point, this Court in the case of
Skandia Insurance Co. Ltd. (supra) observed:-
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“12. The defence built on the exclusion
clause cannot succeed for three
reasons, viz.:
(1) On a true interpretation of
the relevant clause which interpretation
is at peace with the conscience of
Section 96, the condition excluding
driving by a person not duly licensed is
not absolute and the promisor is
absolved once it is shown that he has
done everything in his power to keep,
honour and fulfil the promise and he
himself is not guilty of a deliberate
breach.
(2) Even if it is treated as an
absolute promise, there is substantial
compliance therewith upon an express
or implied mandate being given to the
licensed driver not to allow the vehicle
to be left unattended so that it happens
to be driven by an unlicensed driver.
(3) The exclusion clause has to
be “read down” in order that it is not at
war with the “main purpose” of the
provisions enacted for the protection of
victims of accidents so that the
promisor is exculpated when he does
everything in his power to keep the
promise.”
11. To examine the correctness of the aforesaid view,
the matter was referred to a 3-Judge Bench because of the
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stand taken by the Insurance Company that the insurer shall
be entitled to defend the action on the ground that there has
been a breach of specified condition of policy i.e. the vehicle
should not be driven by a person who is not duly licensed
and in that case the Insurance Company cannot be held to
be liable to indemnify the owner of the vehicle. The 3-Judge
Bench of this Court in the case of Sohan Lal Passi v. P.
Sesh Reddy & Ors., (1996) 5 SCC 21 after interpreting the
provisions of Section 96(2)(b)(ii) of the Act corresponding to
Section 149 of the new Act, observed as under:-
“12. ….
…… According to us, Section 96(2)(b)(ii)
should not be interpreted in a technical
manner. Sub-section (2) of Section 96
only enables the insurance company to
defend itself in respect of the liability to
pay compensation on any of the
grounds mentioned in sub-section (2)
including that there has been a
contravention of the condition excluding
the vehicle being driven by any person
who is not duly licensed. This bar on the
face of it operates on the person
insured. If the person who has got the
vehicle insured has allowed the vehicle
to be driven by a person who is not duly
licensed then only that clause shall be
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attracted. In a case where the person
who has got insured the vehicle with the
insurance company, has appointed a
duly licensed driver and if the accident
takes place when the vehicle is being
driven by a person not duly licensed on
the basis of the authority of the driver
duly authorised to drive the vehicle
whether the insurance company in that
event shall be absolved from its liability?
The expression ‘breach’ occurring in
Section 96(2)(b) means infringement or
violation of a promise or obligation. As
such the insurance company will have to
establish that the insured was guilty of
an infringement or violation of a
promise. The insurer has also to satisfy
the Tribunal or the Court that such
violation or infringement on the part of
the insured was wilful. If the insured has
taken all precautions by appointing a
duly licensed driver to drive the vehicle
in question and it has not been
established that it was the insured who
allowed the vehicle to be driven by a
person not duly licensed, then the
insurance company cannot repudiate its
statutory liability under sub-section (1)
of Section 96. ….”
12. In the case of Ashok Gangadhar Maratha v.
Oriental Insurance Co. Ltd., 1999 (6) SCC 620, the
appellant was the owner of a truck weighing less than
the maximum limit prescribed in Section 2(21) of the Motor
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Vehicles Act. The said truck was, therefore, a light
motor vehicle. It was registered with the respondent insurer
for a certain amount and for a certain period. Within the
period of insurance, the truck met with an accident and got
completely damaged. The appellant’s claim against the
respondent was rejected by the National Consumer Disputes
Redressal Commission. The National Commission accepted
the respondent’s contention that the truck was a goods
carriage or a transport carriage and that the driver of the
truck, who was holding a driving licence in Form 6 to drive
light motor vehicles only, was not authorized to drive a
transport vehicle and, therefore, the insured having
committed breach of the terms of insurance policy and the
provisions of the Act, the respondent insurer was not liable
to indemnify the insured. Allowing the appeal, this Court
held as under:-
“14. Now the vehicle in the present case
weighed 5920 kilograms and the driver
had the driving licence to drive a light
motor vehicle. It is not that, therefore,
the insurance policy covered a transport
vehicle which meant a goods carriage.
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The whole case of the insurer has been
built on a wrong premise. It is itself the
case of the insurer that in the case of a
light motor vehicle which is a nontransport vehicle, there was no statutory
requirement to have a specific
authorisation on the licence of the driver
under Form 6 under the rules. It has,
therefore, to be held that Jadhav was
holding an effective valid licence on the
date of the accident to drive a light
motor vehicle bearing Registration No.
KA-28-567.”
13. In the case of New India Assurance Company,
Shimla v. Kamla & Others, (2001) 4 SCC 342, a fake licence
had happened to be renewed by the statutory authorities and the
question arose as to whether Insurance Company would be liable
to pay compensation in respect of motor accident which occurred
while the vehicle was driven by a person holding such a fake
licence. Answering the question, this Court discussed the
provisions of Sections 146, 147 and 149 of the Act and observed:-
“21. A reading of the proviso to subsection (4) as well as the language
employed in sub-section (5) would indicate
that they are intended to safeguard the
interest of an insurer who otherwise has no
liability to pay any amount to the insured
but for the provisions contained in Chapter
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XI of the Act. This means, the insurer has to
pay to the third parties only on account of
the fact that a policy of insurance has been
issued in respect of the vehicle, but the
insurer is entitled to recover any such sum
from the insured if the insurer were not
otherwise liable to pay such sum to the
insured by virtue of the conditions of the
contract of insurance indicated by the
policy.
22. To repeat, the effect of the above
provisions is this: when a valid insurance
policy has been issued in respect of a vehicle
as evidenced by a certificate of insurance the
burden is on the insurer to pay to the third
parties, whether or not there has been any
breach or violation of the policy conditions.
But the amount so paid by the insurer to third
parties can be allowed to be recovered from
the insured if as per the policy conditions the
insurer had no liability to pay such sum to the
insured.
23. It is advantageous to refer to a twoJudge Bench of this Court in Skandia
Insurance Co. Ltd. v. Kokilaben
Chandravadan (1987 )2 SCC 654. Though the
said decision related to the corresponding
provisions of the predecessor Act (Motor
Vehicles Act, 1939) the observations made in
the judgment are quite germane now as the
corresponding provisions are materially the
same as in the Act. Learned Judges pointed
out that the insistence of the legislature that
a motor vehicle can be used in a public place
only if that vehicle is covered by a policy of
insurance is not for the purpose of promoting
the business of the insurance company but to
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protect the members of the community who
become sufferers on account of accidents
arising from the use of motor vehicles. It is
pointed out in the decision that such
protection would have remained only a paper
protection if the compensation awarded by
the courts were not recoverable by the
victims (or dependants of the victims) of the
accident. This is the raison d'être for the
legislature making it prohibitory for motor
vehicles being used in public places without
covering third-party risks by a policy of
insurance.
24. The principle laid down in the said
decision has been followed by a three-Judge
Bench of this Court with approval in Sohan
Lal Passi v. P. Sesh Reddy (1996) 5 SCC 21.
25. The position can be summed up thus:
The insurer and the insured are bound by the
conditions enumerated in the policy and the
insurer is not liable to the insured if there is
violation of any policy condition. But the
insurer who is made statutorily liable to pay
compensation to third parties on account of
the certificate of insurance issued shall be
entitled to recover from the insured the
amount paid to the third parties, if there was
any breach of policy conditions on account of
the vehicle being driven without a valid
driving licence. Learned counsel for the
insured contended that it is enough if he
establishes that he made all due enquiries
and believed bona fide that the driver
employed by him had a valid driving licence,
in which case there was no breach of the
policy condition. As we have not decided on
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that contention it is open to the insured to
raise it before the Claims Tribunal. In the
present case, if the Insurance Company
succeeds in establishing that there was
breach of the policy condition, the Claims
Tribunal shall direct the insured to pay that
amount to the insurer. In default the insurer
shall be allowed to recover that amount
(which the insurer is directed to pay to the
claimant third parties) from the insured
person.”
14. In the case of National Insurance Co. Ltd. v.
Swaran Singh & Ors., (2004) 3 SCC 297, a 3-Judge Bench
of this Court held as under:-
“47. If a person has been given a licence for
a particular type of vehicle as specified
therein, he cannot be said to have no licence
for driving another type of vehicle which is of
the same category but of different type. As
for example, when a person is granted a
licence for driving a light motor vehicle, he
can drive either a car or a jeep and it is not
necessary that he must have driving licence
both for car and jeep separately.
48. Furthermore, the insurance company
with a view to avoid its liabilities is not only
required to show that the conditions laid
down under Section 149(2)(a) or (b) are
satisfied but is further required to establish
that there has been a breach on the part of
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the insured. By reason of the provisions
contained in the 1988 Act, a more extensive
remedy has been conferred upon those who
have obtained judgment against the user of a
vehicle and after a certificate of insurance is
delivered in terms of Section 147(3). After a
third party has obtained a judgment against
any person insured by the policy in respect of
a liability required to be covered by Section
145, the same must be satisfied by the
insurer, notwithstanding that the insurer may
be entitled to avoid or to cancel the policy or
may in fact have done so. The same
obligation applies in respect of a judgment
against a person not insured by the policy in
respect of such a liability, but who would
have been covered if the policy had covered
the liability of all persons, except that in
respect of liability for death or bodily injury.
xxx xxx xxx
73. The liability of the insurer is a statutory
one. The liability of the insurer to satisfy the
decree passed in favour of a third party is
also statutory.
xxx xxx xxx
110. The summary of our findings to the
various issues as raised in these petitions is
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
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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) An 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 the driver or invalid driving
licence of the driver, as contained in subsection (2)(a)(ii) of Section 149, has 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 the 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 a duly licensed driver or one who
was not disqualified to drive at the relevant
time.
(iv) Insurance companies, 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
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vehicle; the burden of proof wherefor would
be on them.
(v) The court cannot lay down any criteria as
to how the said burden would be discharged,
inasmuch as the same would depend upon
the facts and circumstances 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 the 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 insurer 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
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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 the 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. 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
2Page 26
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 the proviso thereunder and subsection (5) which are intended to cover
specified contingencies mentioned therein to
enable the insurer to recover the amount
paid under the contract of insurance on
behalf of the insured can be taken recourse
to by the Tribunal and be extended to claims
and defences of the insurer against the
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.”
15. In the case of National Insurance Co. Ltd. v.
Kusum Rai and Others, (2006) 4 SCC 250, the
respondent was the owner of a jeep which was admittedly
used as a taxi and thus a commercial vehicle. One Ram Lal
was working as a Khalasi in the said taxi and used to drive
the vehicle some times. He had a driving licence to drive
light motor vehicle. The taxi met with an accident resulting
2Page 27
in the death of a minor girl. One of the issues raised was as
to whether the driver of the said jeep was having a valid and
effective driving licence. The Tribunal relying on the
decision of this Court in New India Assurance Co. v.
Kamla (supra) held that the insurance company cannot get
rid of its third party liability. It was further held that the
insurance company can recover this amount from the owner
of the vehicle. Appeal preferred by the insurance company
was dismissed by the High Court. In appeal before this
Court, the insurance company relying upon the decision in
Oriental Insurance Co. Ltd. v. Nanjappan, 2004 (13) SCC
224 argued that the awarded amount may be paid and be
recovered from the owner of the vehicle. The Insurance
Company moved this Court in appeal against the judgment
of the High Court which was dismissed.
16. In the case of National Insurance Company Ltd. v.
Annappa Irappa Nesaria alias Nesaragi and Others,
2008 (3) SCC 464, the vehicle involved in the accident was a
matador having a goods carriage permit and was insured
2Page 28
with the insurance company. An issue was raised that the
driver of the vehicle did not possess an effective driving
licence to drive a transport vehicle. The Tribunal held that
the driver was having a valid driving licence and allowed the
claim. In appeal filed by the insurance company, the High
Court dismissed the appeal holding that the claimants are
third parties and even on the ground that there is violation of
terms and conditions of the policy the insurance company
cannot be permitted to contend that it has no liability. This
Court after considering the relevant provisions of the Act and
definition and meaning of light goods carriage, light motor
vehicles, heavy goods vehicles, finally came to conclusion
that the driver, who was holding the licence duly granted to
drive light motor vehicle, was entitled to drive the light
passenger carriage vehicle, namely, the matador. This Court
observed as under:
“20. From what has been noticed
hereinbefore, it is evident that
“transport vehicle” has now been
substituted for “medium goods vehicle”
and “heavy goods vehicle”. The light
2Page 29
motor vehicle continued, at the relevant
point of time to cover both “light
passenger carriage vehicle” and “light
goods carriage vehicle”. A driver who
had a valid licence to drive a light motor
vehicle, therefore, was authorized to
drive a light goods vehicle as well.”
17. The heading “Insurance of Motor Vehicles against Third
Party Risks” given in Chapter XI of the Motor Vehicles Act, 1988
(Chapter VIII of 1939 Act) itself shows the intention of the
legislature to make third party insurance compulsory and to
ensure that the victims of accident arising out of use of motor
vehicles would be able to get compensation for the death or
injuries suffered.
The provision has been inserted in order to
protect the persons travelling in vehicles or using the road from
the risk attendant upon the user of the motor vehicles on the
road.
To overcome this ugly situation, the legislature has made it
obligatory that no motor vehicle shall be used unless a third party
insurance is in force.
18. Reading the provisions of Sections 146 and 147 of the
Motor Vehicles Act, it is evidently clear that in certain
2Page 30
circumstances the insurer’s right is safeguarded but in any event
the insurer has to pay compensation when a valid certificate of
insurance is issued notwithstanding the fact that the insurer may
proceed against the insured for recovery of the amount. Under
Section 149 of the Motor Vehicles Act, the insurer can defend the
action inter alia on the grounds, namely, (i) the vehicle was not
driven by a named person, (ii) it was being driven by a person
who was not having a duly granted licence, and (iii) person
driving the vehicle was disqualified to hold and obtain a driving
licence.
Hence, in our considered opinion, the insurer cannot
disown its liability on the ground that although the driver was
holding a licence to drive a light motor vehicle but before driving
light motor vehicle used as commercial vehicle, no endorsement
to drive commercial vehicle was obtained in the driving licence.
In any case, it is the statutory right of a third party to recover the
amount of compensation so awarded from the insurer. It is for
the insurer to proceed against the insured for recovery of the
amount in the event there has been violation of any condition of
the insurance policy.
3Page 31
19. In the instant case, admittedly the driver was holding a
valid driving licence to drive light motor vehicle. There is no
dispute that the motor vehicle in question, by which accident took
place, was Mahindra Maxi Cab. Merely because the driver did not
get any endorsement in the driving licence to drive Mahindra Maxi
Cab, which is a light motor vehicle, the High Court has committed
grave error of law in holding that the insurer is not liable to pay
compensation because the driver was not holding the licence to
drive the commercial vehicle. The impugned judgment is,
therefore, liable to be set aside.
20. We, therefore, allow this appeal, set aside the
impugned judgment of the High Court and hold that the insurer is
liable to pay the compensation so awarded to the dependants of
the victim of the fatal accident. However, there shall be no
order as to costs.
…………………………….J.
(Surinder Singh Nijjar)
3Page 32
…………………………….J.
(M.Y. Eqbal)
New Delhi,
July 1, 2013.
3
Page 1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO… 4834 OF 2013
(Arising out of Special Leave Petition (Civil) No.5091 of 2009)
S. IYYAPAN Appellant (s)
VERSUS
M/S UNITED INDIA INSURANCE
COMPANY LTD. AND ANOTHER Respondent(s)
JUDGMENT
M.Y. Eqbal, J.:
Leave granted.
2. The right of the victim of a road accident to claim
compensation is a statutory one.
The Parliament in its
wisdom inserted the relevant provisions in the Motor
Vehicles Act in order to protect the victims of road accident
travelling in the vehicle or using the road and thereby made
it obligatory that no motor vehicle shall be used unless the
vehicle is compulsorily insured against third party risk.
In
1Page 2
this background,
can an Insurance Company disown its
liability on the ground that the driver of the vehicle although
duly licensed to drive light motor vehicle but there was no
endorsement in the licence to drive light motor vehicle used
as commercial vehicle.
This is the sole question arises for
consideration in this appeal.
3. This appeal by special leave arises in the following
circumstances.
4. On 23.5.1998, at about 8.30 P.M., when the deceased
named Charles was riding his bicycle from east to west and
reached in front of one house, one Sivananayaitha Perumal
(driver of the vehicle who remained ex parte in the
proceedings) came from west to east direction driving a
Mahindra van at high speed and dashed against Charles and
ran away without stopping the vehicle. Charles, who was
admitted in a hospital, succumbed to the injuries sustained
by him. It is evident from the Motor Vehicle Inspector’s
Report that the accident did not occur due to mechanical
defect. On the claim petition filed by deceased’s wife
(respondent No.2 herein), the Motor Accidents Claims
2Page 3
Tribunal (Principal District Judge) at Kanyakumari (in short,
“Tribunal”), after considering the evidence on record,
awarded a compensation of Rs.2,42,400/- with interest at
12% p.a. from the date of petition – to be paid by the
respondents before the Tribunal jointly and severally. The
Tribunal was of the view that the person possessing licence
to drive light motor vehicle is entitled to drive Mahindra maxi
cab.
5. Insurance company preferred an appeal before the
High Court challenging the judgment and award of the
Tribunal. The Insurance Company did not dispute the
quantum of compensation,
but questioned the liability itself
submitting that the driver of the vehicle was not having a
valid driving licence to drive the vehicle on that day.
Insurance company referred the decisions of this Court in
New India Assurance Company Ltd. v. Prabhu Lal 2008
(1) SCC 696 and Sardari & Ors. v. Sushil Kumar & Ors.
2008 ACJ 1307 and submitted that a person having licence
to drive light motor vehicle is not authorized to drive a
commercial vehicle.
3Page 4
6. Per contra, on behalf of the claimant, this Court’s
decisions in Ashok Gangadhar Maratha v. Oriental
Insurance Co. Ltd. AIR 1999 SC 3181 and National
Insurance Co. Ltd. v. Annappa Irappa Nesaria alias
Nesaragi and ors., 2008 (3) SCC 464 were referred and it
was contended that a person who is having a licence to drive
light motor vehicle can drive the commercial vehicle also.
7. After hearing the learned counsel on either side and
considering the aforesaid decisions,
the High Court relying
upon Sardari’s case (supra), observed that since the
vehicle was being used as a taxi, which is a commercial
vehicle, the driver of the said vehicle was required to hold an
appropriate licence.
Hence, there being a breach of the
condition of the contract of insurance, the Insurance
Company is not liable to pay any compensation to the
claimant.
The view taken by the High Court is quoted
hereinbelow:-
“It has not been disputed that the
vehicle was being used as a taxi,
4Page 5
which is a commercial vehicle. The
driver of the said vehicle was required
to hold an appropriate license
therefore. The third respondent
herein, who was driving the said
vehicle at the relevant time, was
holder of a license to drive a light
motor vehicle only. He did not
possess any license to drive a
commercial vehicle. In the present
case, R.W.2 has deposed that the
driver of the vehicle was not having
the license to drive a commercial
vehicle on the date of accident.
Therefore, it is clear that the driver
was not having the driving license to
drive commercial vehicle on the date
of accident. Evidently, therefore,
there was a breach of the condition of
the contract of insurance.
Having
tested the present case in the light of
the Supreme court Judgment in the
case of Sardari and Others v. Sushil Kumar and Others, cited
supra, this court is of the considered
view that, since the driver was not
possessing the driving license to drive
a commercial vehicle, the Insurance
Company is not liable to pay any
compensation to the claimant and the
owner of the vehicle is alone liable to
pay the compensation to the
claimant.”
8. Time and again this Court on various occasions
considered the aim and object of making the insurance
5Page 6
compulsory before a vehicle is put on the road. Indisputably
a new chapter was inserted in the Motor Vehicles Act only
with an intention of welfare measure to be taken to ensure
and protect the plight of a victim of a road accident. In
Skandia Insurance Co. Ltd. v. Kokilaben
Chandravadan, (1987) 2 SCC 654, this Court observed as
under:-
“13. In order to divine the intention of
the legislature in the course of
interpretation of the relevant provisions
there can scarcely be a better test than
that of probing into the motive and
philosophy of the relevant provisions
keeping in mind the goals to be
achieved by enacting the same.
Ordinarily it is not the concern of the
legislature whether the owner of the
vehicle insures his vehicle or not. If the
vehicle is not insured any legal liability
arising on account of third party risk will
have to be borne by the owner of the
vehicle. Why then has the legislature
insisted on a person using a motor
vehicle in a public place to insure
against third party risk by enacting
Section 94? Surely the obligation has
not been imposed in order to promote
the business of the insurers engaged in
the business of automobile insurance.
The provision has been inserted in order
to protect the members of the
6Page 7
community travelling in vehicles or
using the roads from the risk attendant
upon the user of motor vehicles on the
roads. The law may provide for
compensation to victims of the
accidents who sustain injuries in the
course of an automobile accident or
compensation to the dependants of the
victims in the case of a fatal accident.
However, such protection would remain
a protection on paper unless there is a
guarantee that the compensation
awarded by the courts would be
recoverable from the persons held liable
for the consequences of the accident. A
court can only pass an award or a
decree. It cannot ensure that such an
award or decree results in the amount
awarded being actually recovered, from
the person held liable who may not have
the resources. The exercise undertaken
by the law courts would then be an
exercise in futility. And the outcome of
the legal proceedings which by the very
nature of things involve the time cost
and money cost invested from the
scarce resources of the community
would make a mockery of the injured
victims, or the dependants of the
deceased victim of the accident, who
themselves are obliged to incur not
inconsiderable expenditure of time,
money and energy in litigation. To
overcome this ugly situation the
legislature has made it obligatory that
no motor vehicle shall be used unless a
third party insurance is in force. To use
the vehicle without the requisite third
party insurance being in force is a penal
7Page 8
offence. The legislature was also faced
with another problem. The insurance
policy might provide for liability walled
in by conditions which may be specified
in the contract of policy. In order to
make the protection real, the legislature
has also provided that the judgment
obtained shall not be defeated by the
incorporation of exclusion clauses other
than those authorised by Section 96 and
by providing that except and save to the
extent permitted by Section 96 it will be
the obligation of the insurance company
to satisfy the judgment obtained against
the persons insured against third party
risk (vide Section 96). In other words,
the legislature has insisted and made it
incumbent on the user of a motor
vehicle to be armed with an insurance
policy covering third party risks which is
in conformity with the provisions
enacted by the legislature. It is so
provided in order to ensure that the
injured victims of automobile accidents
or the dependants of the victims of fatal
accidents are really compensated in
terms of money and not in terms of
promise. Such a benign provision
enacted by the legislature having regard
to the fact that in the modern age the
use of motor vehicles notwithstanding
the attendant hazards, has become an
inescapable fact of life, has to be
interpreted in a meaningful manner
which serves rather than defeats the
purpose of the legislation. The provision
has therefore to be interpreted in the
twilight of the aforesaid perspective.”
8Page 9
9. The defence which the insurer is entitled to take in a
case for compensation arising out of the motor vehicles
accident was provided under Section 96 of the old Act which
is now Section 149 of the Act of 1988. Section 149 of the
Motor Vehicles Act, 1988 made it mandatory on the part of
the insurer to satisfy the judgments and awards against
persons insured in respect of third party risk. For better
appreciation, Section 149 is reproduced herein below:-
“(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 (l) of section 147 (being a
liability covered by the terms of the
policy) 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
9Page 10
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
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
1Page 11
(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 nondisclosure 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
1Page 12
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 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 condition
other than those in clause (b) of subsection (2) shall, as respects such
liabilities as are required to be covered
by a policy under clause (b) of subsection (1) of section 147, be of no
effect:
1Page 13
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). …….
(6). …….”
10. Section 149(2)(a)(ii) gives a right to the insurer to take
a defence that person driving the vehicle at the time of
accident was not duly licensed. In other words, Section
149(2)(a)(ii) puts a condition excluding driving by any
person who is not duly licensed. The question arose before
this Court as to whether the Insurance Company can
repudiate its liability to pay the compensation in respect of
the accident by a vehicle taking a defence that at the
relevant time it was being driven by a person having no
licence. While considering this point, this Court in the case of
Skandia Insurance Co. Ltd. (supra) observed:-
1Page 14
“12. The defence built on the exclusion
clause cannot succeed for three
reasons, viz.:
(1) On a true interpretation of
the relevant clause which interpretation
is at peace with the conscience of
Section 96, the condition excluding
driving by a person not duly licensed is
not absolute and the promisor is
absolved once it is shown that he has
done everything in his power to keep,
honour and fulfil the promise and he
himself is not guilty of a deliberate
breach.
(2) Even if it is treated as an
absolute promise, there is substantial
compliance therewith upon an express
or implied mandate being given to the
licensed driver not to allow the vehicle
to be left unattended so that it happens
to be driven by an unlicensed driver.
(3) The exclusion clause has to
be “read down” in order that it is not at
war with the “main purpose” of the
provisions enacted for the protection of
victims of accidents so that the
promisor is exculpated when he does
everything in his power to keep the
promise.”
11. To examine the correctness of the aforesaid view,
the matter was referred to a 3-Judge Bench because of the
1Page 15
stand taken by the Insurance Company that the insurer shall
be entitled to defend the action on the ground that there has
been a breach of specified condition of policy i.e. the vehicle
should not be driven by a person who is not duly licensed
and in that case the Insurance Company cannot be held to
be liable to indemnify the owner of the vehicle. The 3-Judge
Bench of this Court in the case of Sohan Lal Passi v. P.
Sesh Reddy & Ors., (1996) 5 SCC 21 after interpreting the
provisions of Section 96(2)(b)(ii) of the Act corresponding to
Section 149 of the new Act, observed as under:-
“12. ….
…… According to us, Section 96(2)(b)(ii)
should not be interpreted in a technical
manner. Sub-section (2) of Section 96
only enables the insurance company to
defend itself in respect of the liability to
pay compensation on any of the
grounds mentioned in sub-section (2)
including that there has been a
contravention of the condition excluding
the vehicle being driven by any person
who is not duly licensed. This bar on the
face of it operates on the person
insured. If the person who has got the
vehicle insured has allowed the vehicle
to be driven by a person who is not duly
licensed then only that clause shall be
1Page 16
attracted. In a case where the person
who has got insured the vehicle with the
insurance company, has appointed a
duly licensed driver and if the accident
takes place when the vehicle is being
driven by a person not duly licensed on
the basis of the authority of the driver
duly authorised to drive the vehicle
whether the insurance company in that
event shall be absolved from its liability?
The expression ‘breach’ occurring in
Section 96(2)(b) means infringement or
violation of a promise or obligation. As
such the insurance company will have to
establish that the insured was guilty of
an infringement or violation of a
promise. The insurer has also to satisfy
the Tribunal or the Court that such
violation or infringement on the part of
the insured was wilful. If the insured has
taken all precautions by appointing a
duly licensed driver to drive the vehicle
in question and it has not been
established that it was the insured who
allowed the vehicle to be driven by a
person not duly licensed, then the
insurance company cannot repudiate its
statutory liability under sub-section (1)
of Section 96. ….”
12. In the case of Ashok Gangadhar Maratha v.
Oriental Insurance Co. Ltd., 1999 (6) SCC 620, the
appellant was the owner of a truck weighing less than
the maximum limit prescribed in Section 2(21) of the Motor
1Page 17
Vehicles Act. The said truck was, therefore, a light
motor vehicle. It was registered with the respondent insurer
for a certain amount and for a certain period. Within the
period of insurance, the truck met with an accident and got
completely damaged. The appellant’s claim against the
respondent was rejected by the National Consumer Disputes
Redressal Commission. The National Commission accepted
the respondent’s contention that the truck was a goods
carriage or a transport carriage and that the driver of the
truck, who was holding a driving licence in Form 6 to drive
light motor vehicles only, was not authorized to drive a
transport vehicle and, therefore, the insured having
committed breach of the terms of insurance policy and the
provisions of the Act, the respondent insurer was not liable
to indemnify the insured. Allowing the appeal, this Court
held as under:-
“14. Now the vehicle in the present case
weighed 5920 kilograms and the driver
had the driving licence to drive a light
motor vehicle. It is not that, therefore,
the insurance policy covered a transport
vehicle which meant a goods carriage.
1Page 18
The whole case of the insurer has been
built on a wrong premise. It is itself the
case of the insurer that in the case of a
light motor vehicle which is a nontransport vehicle, there was no statutory
requirement to have a specific
authorisation on the licence of the driver
under Form 6 under the rules. It has,
therefore, to be held that Jadhav was
holding an effective valid licence on the
date of the accident to drive a light
motor vehicle bearing Registration No.
KA-28-567.”
13. In the case of New India Assurance Company,
Shimla v. Kamla & Others, (2001) 4 SCC 342, a fake licence
had happened to be renewed by the statutory authorities and the
question arose as to whether Insurance Company would be liable
to pay compensation in respect of motor accident which occurred
while the vehicle was driven by a person holding such a fake
licence. Answering the question, this Court discussed the
provisions of Sections 146, 147 and 149 of the Act and observed:-
“21. A reading of the proviso to subsection (4) as well as the language
employed in sub-section (5) would indicate
that they are intended to safeguard the
interest of an insurer who otherwise has no
liability to pay any amount to the insured
but for the provisions contained in Chapter
1Page 19
XI of the Act. This means, the insurer has to
pay to the third parties only on account of
the fact that a policy of insurance has been
issued in respect of the vehicle, but the
insurer is entitled to recover any such sum
from the insured if the insurer were not
otherwise liable to pay such sum to the
insured by virtue of the conditions of the
contract of insurance indicated by the
policy.
22. To repeat, the effect of the above
provisions is this: when a valid insurance
policy has been issued in respect of a vehicle
as evidenced by a certificate of insurance the
burden is on the insurer to pay to the third
parties, whether or not there has been any
breach or violation of the policy conditions.
But the amount so paid by the insurer to third
parties can be allowed to be recovered from
the insured if as per the policy conditions the
insurer had no liability to pay such sum to the
insured.
23. It is advantageous to refer to a twoJudge Bench of this Court in Skandia
Insurance Co. Ltd. v. Kokilaben
Chandravadan (1987 )2 SCC 654. Though the
said decision related to the corresponding
provisions of the predecessor Act (Motor
Vehicles Act, 1939) the observations made in
the judgment are quite germane now as the
corresponding provisions are materially the
same as in the Act. Learned Judges pointed
out that the insistence of the legislature that
a motor vehicle can be used in a public place
only if that vehicle is covered by a policy of
insurance is not for the purpose of promoting
the business of the insurance company but to
1Page 20
protect the members of the community who
become sufferers on account of accidents
arising from the use of motor vehicles. It is
pointed out in the decision that such
protection would have remained only a paper
protection if the compensation awarded by
the courts were not recoverable by the
victims (or dependants of the victims) of the
accident. This is the raison d'être for the
legislature making it prohibitory for motor
vehicles being used in public places without
covering third-party risks by a policy of
insurance.
24. The principle laid down in the said
decision has been followed by a three-Judge
Bench of this Court with approval in Sohan
Lal Passi v. P. Sesh Reddy (1996) 5 SCC 21.
25. The position can be summed up thus:
The insurer and the insured are bound by the
conditions enumerated in the policy and the
insurer is not liable to the insured if there is
violation of any policy condition. But the
insurer who is made statutorily liable to pay
compensation to third parties on account of
the certificate of insurance issued shall be
entitled to recover from the insured the
amount paid to the third parties, if there was
any breach of policy conditions on account of
the vehicle being driven without a valid
driving licence. Learned counsel for the
insured contended that it is enough if he
establishes that he made all due enquiries
and believed bona fide that the driver
employed by him had a valid driving licence,
in which case there was no breach of the
policy condition. As we have not decided on
2Page 21
that contention it is open to the insured to
raise it before the Claims Tribunal. In the
present case, if the Insurance Company
succeeds in establishing that there was
breach of the policy condition, the Claims
Tribunal shall direct the insured to pay that
amount to the insurer. In default the insurer
shall be allowed to recover that amount
(which the insurer is directed to pay to the
claimant third parties) from the insured
person.”
14. In the case of National Insurance Co. Ltd. v.
Swaran Singh & Ors., (2004) 3 SCC 297, a 3-Judge Bench
of this Court held as under:-
“47. If a person has been given a licence for
a particular type of vehicle as specified
therein, he cannot be said to have no licence
for driving another type of vehicle which is of
the same category but of different type. As
for example, when a person is granted a
licence for driving a light motor vehicle, he
can drive either a car or a jeep and it is not
necessary that he must have driving licence
both for car and jeep separately.
48. Furthermore, the insurance company
with a view to avoid its liabilities is not only
required to show that the conditions laid
down under Section 149(2)(a) or (b) are
satisfied but is further required to establish
that there has been a breach on the part of
2Page 22
the insured. By reason of the provisions
contained in the 1988 Act, a more extensive
remedy has been conferred upon those who
have obtained judgment against the user of a
vehicle and after a certificate of insurance is
delivered in terms of Section 147(3). After a
third party has obtained a judgment against
any person insured by the policy in respect of
a liability required to be covered by Section
145, the same must be satisfied by the
insurer, notwithstanding that the insurer may
be entitled to avoid or to cancel the policy or
may in fact have done so. The same
obligation applies in respect of a judgment
against a person not insured by the policy in
respect of such a liability, but who would
have been covered if the policy had covered
the liability of all persons, except that in
respect of liability for death or bodily injury.
xxx xxx xxx
73. The liability of the insurer is a statutory
one. The liability of the insurer to satisfy the
decree passed in favour of a third party is
also statutory.
xxx xxx xxx
110. The summary of our findings to the
various issues as raised in these petitions is
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
2Page 23
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) An 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 the driver or invalid driving
licence of the driver, as contained in subsection (2)(a)(ii) of Section 149, has 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 the 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 a duly licensed driver or one who
was not disqualified to drive at the relevant
time.
(iv) Insurance companies, 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
2Page 24
vehicle; the burden of proof wherefor would
be on them.
(v) The court cannot lay down any criteria as
to how the said burden would be discharged,
inasmuch as the same would depend upon
the facts and circumstances 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 the 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 insurer 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
2Page 25
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 the 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. 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
2Page 26
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 the proviso thereunder and subsection (5) which are intended to cover
specified contingencies mentioned therein to
enable the insurer to recover the amount
paid under the contract of insurance on
behalf of the insured can be taken recourse
to by the Tribunal and be extended to claims
and defences of the insurer against the
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.”
15. In the case of National Insurance Co. Ltd. v.
Kusum Rai and Others, (2006) 4 SCC 250, the
respondent was the owner of a jeep which was admittedly
used as a taxi and thus a commercial vehicle. One Ram Lal
was working as a Khalasi in the said taxi and used to drive
the vehicle some times. He had a driving licence to drive
light motor vehicle. The taxi met with an accident resulting
2Page 27
in the death of a minor girl. One of the issues raised was as
to whether the driver of the said jeep was having a valid and
effective driving licence. The Tribunal relying on the
decision of this Court in New India Assurance Co. v.
Kamla (supra) held that the insurance company cannot get
rid of its third party liability. It was further held that the
insurance company can recover this amount from the owner
of the vehicle. Appeal preferred by the insurance company
was dismissed by the High Court. In appeal before this
Court, the insurance company relying upon the decision in
Oriental Insurance Co. Ltd. v. Nanjappan, 2004 (13) SCC
224 argued that the awarded amount may be paid and be
recovered from the owner of the vehicle. The Insurance
Company moved this Court in appeal against the judgment
of the High Court which was dismissed.
16. In the case of National Insurance Company Ltd. v.
Annappa Irappa Nesaria alias Nesaragi and Others,
2008 (3) SCC 464, the vehicle involved in the accident was a
matador having a goods carriage permit and was insured
2Page 28
with the insurance company. An issue was raised that the
driver of the vehicle did not possess an effective driving
licence to drive a transport vehicle. The Tribunal held that
the driver was having a valid driving licence and allowed the
claim. In appeal filed by the insurance company, the High
Court dismissed the appeal holding that the claimants are
third parties and even on the ground that there is violation of
terms and conditions of the policy the insurance company
cannot be permitted to contend that it has no liability. This
Court after considering the relevant provisions of the Act and
definition and meaning of light goods carriage, light motor
vehicles, heavy goods vehicles, finally came to conclusion
that the driver, who was holding the licence duly granted to
drive light motor vehicle, was entitled to drive the light
passenger carriage vehicle, namely, the matador. This Court
observed as under:
“20. From what has been noticed
hereinbefore, it is evident that
“transport vehicle” has now been
substituted for “medium goods vehicle”
and “heavy goods vehicle”. The light
2Page 29
motor vehicle continued, at the relevant
point of time to cover both “light
passenger carriage vehicle” and “light
goods carriage vehicle”. A driver who
had a valid licence to drive a light motor
vehicle, therefore, was authorized to
drive a light goods vehicle as well.”
17. The heading “Insurance of Motor Vehicles against Third
Party Risks” given in Chapter XI of the Motor Vehicles Act, 1988
(Chapter VIII of 1939 Act) itself shows the intention of the
legislature to make third party insurance compulsory and to
ensure that the victims of accident arising out of use of motor
vehicles would be able to get compensation for the death or
injuries suffered.
The provision has been inserted in order to
protect the persons travelling in vehicles or using the road from
the risk attendant upon the user of the motor vehicles on the
road.
To overcome this ugly situation, the legislature has made it
obligatory that no motor vehicle shall be used unless a third party
insurance is in force.
18. Reading the provisions of Sections 146 and 147 of the
Motor Vehicles Act, it is evidently clear that in certain
2Page 30
circumstances the insurer’s right is safeguarded but in any event
the insurer has to pay compensation when a valid certificate of
insurance is issued notwithstanding the fact that the insurer may
proceed against the insured for recovery of the amount. Under
Section 149 of the Motor Vehicles Act, the insurer can defend the
action inter alia on the grounds, namely, (i) the vehicle was not
driven by a named person, (ii) it was being driven by a person
who was not having a duly granted licence, and (iii) person
driving the vehicle was disqualified to hold and obtain a driving
licence.
Hence, in our considered opinion, the insurer cannot
disown its liability on the ground that although the driver was
holding a licence to drive a light motor vehicle but before driving
light motor vehicle used as commercial vehicle, no endorsement
to drive commercial vehicle was obtained in the driving licence.
In any case, it is the statutory right of a third party to recover the
amount of compensation so awarded from the insurer. It is for
the insurer to proceed against the insured for recovery of the
amount in the event there has been violation of any condition of
the insurance policy.
3Page 31
19. In the instant case, admittedly the driver was holding a
valid driving licence to drive light motor vehicle. There is no
dispute that the motor vehicle in question, by which accident took
place, was Mahindra Maxi Cab. Merely because the driver did not
get any endorsement in the driving licence to drive Mahindra Maxi
Cab, which is a light motor vehicle, the High Court has committed
grave error of law in holding that the insurer is not liable to pay
compensation because the driver was not holding the licence to
drive the commercial vehicle. The impugned judgment is,
therefore, liable to be set aside.
20. We, therefore, allow this appeal, set aside the
impugned judgment of the High Court and hold that the insurer is
liable to pay the compensation so awarded to the dependants of
the victim of the fatal accident. However, there shall be no
order as to costs.
…………………………….J.
(Surinder Singh Nijjar)
3Page 32
…………………………….J.
(M.Y. Eqbal)
New Delhi,
July 1, 2013.
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