Insurance Co. Ltd. Vs. Swaran Singh & Ors  Insc 12 (5 January 2004)
V.N. Khare, D.M. Dharmadhikari & S.B. Sinha.
SLP (C) 10017/03, 10042, 10055, 10510, 10787, 10829-10831, 11129/2003, SLP(C)
153/04 CC No. 4917/2003, SLP(C) 154/04 CC No. 4997/2003, SLP(C) 156/04 CC No.
5137/2003, SLP(C) 155/04 CC No.5196/2003, SLP(C) 157/04 CC No.5360/2003, SLP(C)
159/04 CC No. 5564/2003, SLP(C) 356/04 CC No. 5877/2003, SLP (C) No. 9335,
9356, 9554, 9560, 9811, 9812, 9815, 9867, 9900 of 2003, 9947/2003, SLP(C)
321/04 CC No. 4686/2003, SLP(C) 160/04 CC No. 4739/2003, SLP(C) 357/04 CC No.
4747/2003, SLP (C) No. 15528/2002 & SLP (C) No. 15772/2002 By V.N.Khare,
CJI & D.M.Dharmadhikari, S.B. Sinha, JJ.
of Section 149(2)(a)(ii) vis-`-vis the proviso appended to sub-sections (4) and
(5) of the Motor Vehicles Act, 1988 is involved in this batch of special leave
petitions filed by the National Insurance Company Limited (hereinafter referred
to as Insurer) assailing various awards of the Motor Vehicle Claims Tribunal
and judgments of the High Courts.
view of the fact that these petitions involve pure questions of law, it is not
necessary to advert to the individual fact pertaining to each matter.
however, is to point out that the vehicles insured with the petitioners were
involved in accidents resulting in filing of claim applications by the
respective legal representatives of the deceased(s) or the injured person(s),
as the case may be.
raised by the Petitioner company in the claim petitions purported to be in
terms of Section 149(2)(a)(ii) of the Motor Vehicles Act, 1988 (hereinafter
referred to as 'the Act') were :
licence produced by the driver or owner of the vehicle was a fake one;
did not have any licence whatsoever;
although was granted to the concerned driver but on expiry thereof, the same
had not been renewed;
granted to the drivers being for one class or description of vehicle but the
vehicle involved in the accident was of different class or description; and
vehicle in question was driven by a person having a learner's licence.
we proceed further in the matter it is relevant to notice certain relevant
statutory provisions which are :
"driving licence" means the licence issued by a competent authority
under Chapter II authorising the person specified therein to drive, otherwise
than as a learner, a motor vehicle or a motor vehicle of any specified class or
Necessity for driving licence. –
person shall drive a motor vehicle in any public place unless he holds an
effective driving licence issued to him authorising him to drive the vehicle;
and no person shall so drive a transport vehicle other than [a motor cab or motor
cycle hired for his own use or rented under any scheme made under subsection
(2) of section 75 unless his driving licence specifically entitles him so to
The conditions subject to which sub-section (1) shall not apply to a person
receiving instructions in driving a motor vehicle shall be such as may be
prescribed by the Central Government.
limit in connection with driving of motor vehicles. –
person under the age of eighteen years shall drive a motor vehicle in any
that a motor cycle with engine capacity not exceeding 50cc may be driven in a
public place by a person after attaining the age of sixteen years.
Subject to the provisions of section 18, no person under the age of twenty
years shall drive a transport vehicle in any public place.
learner's licence or driving licence shall be issued to any person to drive a
vehicle of the class to which he has made an application unless he is eligible
to drive that class of vehicle under this section.
Responsibility of owners of motor vehicles for contravention of sections 3 and
4. -No owner or person in charge of a motor vehicle shall cause or permit any
person who does not satisfy the provisions of section 3 or section 4 to drive
on the holding of driving licences. –
person shall, while he holds any driving licence for the time being in force,
hold any other driving licence except a learner's licence or a driving licence
issued in accordance with the provisions of section 18 or a document authorising,
in accordance with the rules made under section 139, the person specified
therein to drive a motor vehicle.
holder of a driving licence or a learner's licence shall permit it to be used
by any other person.
Nothing in this section shall prevent a licensing authority having the
jurisdiction referred to in sub-section (1) of section 9 from adding to the
classes of vehicles which the driving licence authorises the holder to drive.
Restrictions on the granting of learner's licences for certain vehicles.
person shall be granted a learner's licence to drive a transport vehicle unless
he has held a driving licence to drive a light motor vehicle for at least one
person under the age of eighteen years shall be granted a learner's licence to
drive a motor cycle without gear except with the consent in writing of the
person having the care of the person desiring the learner's licence."
Section 9 provides for grant of driving licence.
Grant of driving licence. –
Any person who is not for the time being disqualified for holding or obtaining
a driving licence may apply to the licensing authority having jurisdiction in
the area –
which he ordinarily resides or carries on business, or
in which the school or establishment referred to in section 12 from where he is
receiving or has received instruction in driving a motor vehicle is situated. for
the issue to him of a driving licence. xxx xxx xxx xxx
When any application has been duly made to the appropriate licensing authority
and the applicant has satisfied such authority of his competence to drive, the
licensing authority shall issue the applicant a driving licence unless the
applicant is for the time being disqualified for holding or obtaining a driving
that a licensing authority may issue a driving licence to drive a motor cycle
or a light motor vehicle notwithstanding that it is not the appropriate
licensing authority, if the licensing authority is satisfied that there is good
and sufficient reason for the applicant's inability to apply to the appropriate
further that the licensing authority shall not issue a new driving licence to
the applicant, if he had previously held a driving licence, unless it is
satisfied that there is good and sufficient reason for his inability to obtain
a duplicate copy of his former licence.
the licensing authority is satisfied, after giving the applicant an opportunity
of being heard, that he-
a habitual criminal or a habitual drunkard; or
a habitual addict to any narcotic drug or psychotropic substance within the
meaning of the Narcotic Drugs and Psychotropic Substances Act, 1985 (61 of
a person whose licence to drive any motor vehicle has, at any time earlier,
been revoked, it may, for reasons to be recorded in writing, make an order
refusing to issue a driving licence to such person and any person aggrieved by
an order made by a licensing authority under this sub-section may, within
thirty days of the receipt of the order, appeal to the prescribed authority.
Any driving licence for driving a motor cycle in force immediately before the
commencement of this Act shall, after such commencement, be deemed to be
effective for driving a motor cycle with or without gear.
Form and contents of licences to drive. –
Every learner's licence and driving licence, except a driving licence issued
under section 18, shall be in such form and shall contain such information as
may be prescribed by the Central Government.
learner's licence or, as the case may be, driving licence shall also be
expressed as entitling the holder to drive a motor vehicle of one or more of
the following classes, namely: -
cycle without gear;
cycle with gear;
vehicle of a specified description.
Currency of licences to drive motor vehicles. –
learner's licence issued under this Act shall, subject to the other provisions
of this Act, be effective for a period of six months from the date of issue of
driving licence issued or renewed under this Act shall. –
the case of a licence to drive a transport vehicle, be effective for a period
of three years:
that in the case of licence to drive a transport vehicle carrying goods of
dangerous or hazardous nature he effective for a period of one year and renewal
thereof shall be subject to the condition that the driver undergoes one day
refresher course of the prescribed syllabus; and
the case of any other licence,-
the person obtaining the licence, either originally or on renewal thereof, has
not attained the age of fifty years on the date of issue or, as the case may
he, renewal thereof,-
effective for a period of twenty years from the date of such issue or renewal;
the date on which such person attains the age of fifty years, whichever is
if the person referred to in sub-clause (i), has attained the age of fifty
years on the date of issue or as the case may be, renewal thereof, be
effective, on payment of such fee as may be prescribed, for a period of five
years from the date of such issue or renewal:
that every driving licence shall, notwithstanding its expiry under this
subsection continue to be effective for a period of thirty days from such
Renewal of driving licences. –
Any licensing authority may, on application made to it, renew a driving licence
issued under the provisions of this Act with effect from the date of its
that in any case where the application for the renewal of a licence is made
more than thirty days after the date of its expiry, the driving licence shall
be renewed with effect from the date of its renewal:
further that where the application is for the renewal of a licence to drive a
transport vehicle or where in any other case the applicant has attained the age
of forty years, the same shall be accompanied by a medical certificate in the
same form and in the same manner as is referred to in sub-section (3) of
section 8, and the provisions of sub-section (4) of section 8 shall, so far as
may be, apply in relation to every such case as they apply in relation to a
application for the renewal of a driving licence shall be made in such form and
accompanied by such documents as may be prescribed by the Central Government.
Where an application for the renewal of a driving licence is made previous to,
or not more than thirty days after the date of its expiry, the fee payable for
such renewal shall be such as may be prescribed by the Central Government in
Where an application for the renewal of a driving licence is made more than
thirty days after the date of its expiry the fee payable for such renewal shall
be such amount as may be prescribed by the Central Government:
that the fee referred to in sub-section (3) may be accepted by the licensing
authority in respect of an application for the renewal of a driving licence
made under this sub-section if it is satisfied that the applicant was prevented
by good and sufficient cause from applying within the time specified in
further that if the application is made more than five years after the driving licence
has ceased to be effective the licensing authority may refuse to renew the
driving licence unless the applicant, undergoes and passes to its satisfaction
the test of competence to drive referred to in sub-section (3) of section 9.
Where the application for renewal has been rejected, the fee paid shall be
refunded to such extent and in such manner as may be prescribed by the Central
Where the authority renewing the driving licence is not the authority which
issued the driving licence it shall intimate the fact of Renewal to the
authority which issued the driving licence.
Revocation of driving licence on grounds of disease or disability.
-Notwithstanding anything contained in the foregoing sections, any licensing
authority may at any time revoke a driving licence or may require, as a
condition of continuing to hold such driving licence, the holder thereof to produce
a medical certificate in the same form and in the same manner as is referred to
in sub-section (3) of section 8 if the licensing authority has reasonable
grounds to believe that the holder of the driving licence is, by virtue of any
disease or disability, unfit to drive a motor vehicle and where the authority
revoking a driving licence is not the authority which issued the same, it shall
intimate the fact of revocation to the authority which issued that licence."
Section 19 provides for power of the licensing authority to disqualify from
holding a driving licence or revoke such licence.
20 empowers the court to disqualify a person in the event a person is convicted
of an offence under the Motor Vehicles Act or of an offence in the commission
of which a motor vehicle was used.
21 provides for suspension of driving licence in certain cases.
23 provides for effect of disqualification order. Section 27 provides for the
power of the Central Government to make rules.
II of the Act deals with the provisions of licensing of drivers of motor
147 of the Act provides for requirements of policies and limits of liability.
Section 149 provides for the duty of insurers to satisfy judgments and award
against persons insured in respect of third party risks.
(1) of Section 149 postulates that in the event of a certificate of insurance
has been issued in terms of Section sub-section (3) of Section 147 a judgment
or award in respect of any such liability is obtained by the insured, the
insurer notwithstanding its entitlement to avoid or cancel or may have avoided
or cancelled the policy, the insurer shall, subject to the provisions of this
section, pay to the person entitled to the benefit of the decree any sum not
exceeding the sum assured payable thereunder, as if he were the judgment
debtor, in respect of the liability, together with any amount payable in
respect of costs and any sum payable in respect of interest on that sum by
virtue of any enactment relating to interest on judgments.
(2) of Section 149 of the Act, however, seeks to make an exception thereto.
Sub-sections (4), (5) and (7) of Section 149 read thus:
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 sub-section (2)
shall, as respects such liabilities as are required to be covered by a policy
under clause (b) of sub-section (1) of section 147, be of no effect:
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.
the amount which an insurer becomes liable under this section to pay in respect
of a liability incurred by a person insured by a policy exceeds the amount for
which the insurer would apart from the provisions of this section be liable
under the policy in respect of that liability, the insurer shall be entitled to
recover the excess from that person.
insurer to whom the notice referred to in sub-section (2) or sub-section (3)
has been given shall be entitled to avoid his liability to any person entitled
to the benefit of any such judgment or award as is referred to in sub-section
(1) or in such judgment as is referred to in sub-section (3) otherwise than in
the manner provided for in subsection (2) or in the corresponding law of the
reciprocating country, as the case may be." Sections 165 of the Act
provides as under :
Claims Tribunals. –
State Government may, by notification in the Official Gazette, constitute one
or more Motor Accidents Claims Tribunals (hereafter in this Chapter referred to
as Claims Tribunal) for such area as may be specified in the notification for
the purpose of adjudicating upon claims for compensation in respect of accidents
involving the death of, or bodily injury to, persons arising out of the use of
motor vehicles, or damages to any property of a third party so arising, or
Explanation.- For the removal of doubts, it is
hereby declared that the expression "claims for compensation in respect of
accidents involving the death of or bodily injury to persons arising out of the
use of motor vehicles" includes claims for compensation under section 140
[and section 163A].
Claims Tribunal shall consist of such number of members as the State Government
may think fit to appoint and where it consists of two or more members, one of
them shall be appointed as the Chairman thereof.
person shall not be qualified for appointment as a member of a Claims Tribunal
unless he –
or has been, a Judge of a High Court, or
or has been a District Judge, or
qualified for appointment as a High Court Judge [or as a District Judge].
Where two or more Claims Tribunals are constituted for any area, the State
Government, may by general or special order, regulate the distribution of
business among them." Section 168 of the Act provides as follows :
Award of the Claims Tribunal.- On receipt of an application for compensation
made under section 166, the Claims Tribunal shall, after giving notice of the
application to the insurer and after giving the parties (including the insurer)
an opportunity of being heard, hold an inquiry into the claim or, as the case
may be, each of the claims and, subject to the provisions of section 162 may
make an award determining the amount of compensation which appears to it to be
just and specifying the person or persons to whom compensation shall be paid
and in making the award the Claims Tribunal shall specify the amount which
shall be paid by the insurer or owner or driver of the vehicle involved in the
accident or by all or any of them, as the case may be;
that where such application makes a claim for compensation under section 140 in
respect of the death or permanent disablement of any person, such claim and any
other claim (whether made in such application or otherwise) for compensation in
respect of such death or permanent disablement shall be disposed of in
accordance with the provisions of Chapter X.
The Claims Tribunal shall arrange to deliver copies of the award to the parties
concerned expeditiously and in any case within a period of fifteen days from
the date of the award.
When an award is made under this section, the person who is required to pay any
amount in terms of such award shall, within thirty days of the date of
announcing the award by the Claims Tribunal, deposit the entire amount awarded
in such manner as the Claims Tribunal may direct." Mr. Harish Salve and
Mr. M.L. Verma, learned senior counsel appearing on behalf of the insurer made
the following submissions in support of these petitions.
The insurer in terms of sub-section (2) of Section 149 of the Act has an
absolute right to raise a defence specified, inter alia, in sub-clause (ii) of
clause (a) thereof;
Such a right being clear and unequivocal having regard to the judgment of this
Court in National Insurance Company Ltd., 456] must be allowed to be invoked by
the insurer to its full effect. In the proceedings before the Tribunal, the
insurers, thus, were entitled to show that the vehicle involved in the accident
at the material point of time was driven by a person who was not 'duly
licensed' or was 'disqualified to hold a licence'.
person cannot be said to be 'duly licensed' unless he has been granted a
permanent licence for driving a particular vehicle in terms of the provisions
of Chapter II of the Motor Vehicles Act and, thus, a vehicle cannot be held to
be driven by a person duly licensed therefor if :
does not hold a licence;
holds a fake licence;
holds a licence but the validity thereof has expired; or
does not hold a licence for the type of vehicle which he was driving in terms
of Chapter II of the Motor Vehicles Act, 1988, or
holds merely a learner's licence. Reliance in this behalf has been Tambe and
Others [(1996) 2 SCC 328] and United India Insurance Co. Ltd. vs. Gian Chand
and Others [(1997) 7 SCC 558].
Once the defence by the insurer is established in the proceedings before the
Tribunal, it is bound to discharge the insurer and fix the liability only on
the owner and/or the driver of the vehicle.
Once it is held that the insurer has been able to establish its defence, the
Tribunal or the Court cannot direct the insurance companies to pay the awarded
amount to the claimant and in turn recover the same from the owner and the
driver of the vehicle.
decisions of this Court in New India Assurance Co., Shimla vs. Kamla and Others
etc. [(2001) 4 SCC 342] and United India Insurance Company Ltd. vs. Lehru and
Others [(2003) 3 SCC 338] wherein it has been held that the court is entitled
to issue a direction upon the insurer to satisfy the award and thereafter
recover the same from the owner of the vehicle do not lay down the correct law
and should be overruled.
learned counsel appearing on behalf of the respondents, who are third party
claimants on the other hand, submitted:
that the Parliament deliberately used two different expressions 'effective licence'
in Section 3 and 'duly licensed' in sub-section (2) of Section 149 of the Act
which are suggestive of the fact that a driver once licensed, unless he is
disqualified, would continue to be a duly licensed person for the purpose of
Chapter XI of the Act.
Thus, once a person has been duly licensed but has not renewed his licence, the
same would not come within the purview of Section 149 and thus would not
constitute a statutory defence available to the insurer in terms thereof. Only
in the event of lapse of five years from the date of expiry of the licence,
such statutory defence may be raised.
Once a certificate of insurance is issued in terms of the provisions of the
Act, the insurer has a liability to satisfy an award. It has been pointed that
a major departure has been made in the 1988 Act insofar as in terms of Section
96(2)(b) of the 1939 Act all the statutory defences were available in terms of
sub-section (3) thereof provided that the policy conditions other than those
prescribed therein had no effect; whereas in the new Act, Section 149(2)(a)
prescribes that the policy is void if it is obtained by non-disclosure of
material fact. Section 149(4) confines to only clause (b) and states that the
conditions of policy except as mentioned in clause (b) of sub-section (2) are
of no effect and, thus, after the amendment, except in cases which are covered
under clause (b) of Section 149, the insurance companies are liable to pay to
the third parties. In other words, the right of insurer to avoid the claim of
the third party would arise only when the policy is obtained by
misrepresentation of material fact and fraud and in no other case.
Sub-section (1) of Section 149 makes it clear that the insurer should pay first
to the third parties and recover the same if they are absolved on any of the
grounds specified in sub-section (2) thereof. Reliance, in this connection, has
been placed on BIG Insurance Co. Ltd. vs. Captain Itbar Singh and Others [AIR
& Others [(2001) 4 SCC 342].
The burden to prove the defence raised by the insurers as regard the question
as to whether there has been any breach of violation of policy conditions of
the insurance policy has been issued or not, would be upon the insurer.
The breach on the part of the insured must be a wilful one being of fundamental
condition by the insured himself and the burden of proof, therefore, would be
on the insurer.
With a view to avoid its liabilities it is not sufficient for the insurer to
show that the person driving at the time of accident was not duly licensed but
it must further be established that there was a breach on the part of the
insured. Reliance, in this connection, has been placed on Narcinva V. Kamath
and Another vs. Alfredo Antonio Doe Martins and Others [(1985) 2 SCC 574], Skandia
Insurance Company Ltd. vs. Kokilaben Chandevadan and Others [(1987) 2 SCC 654],
Sohan Lal Passi vs. P. Sesh Reddy and Others [(1996) 5 SCC 21] and United India
Insurance Company Ltd. vs. Lehru & Others [(2003) 3 SCC 338].
we deal with various contentions raised by the parties it is desirable to look
into the legislative history of the provisions for its interpretation. The
relevant provisions of the Act indisputably are beneficent to the claimant.
They are in the nature of a Social Welfare Legislation.
XI of the Motor Vehicles Act, 1988, inter alia, provides for compulsory
insurance of vehicles in relation to the matters specified therefor. The
provision for compulsory insurance indisputably has been made inter alia with a
view to protect the right of a third party.
Court in Sohan Lal Passi (supra) noted:
The road accidents in India have touched a new height. In majority of cases
because of the rash and negligent driving, innocent persons become victims of such
accidents because of which their dependants in many cases are virtually on the
streets. In this background, the question of payment of compensation in respect
of motor accidents has assumed great importance for public as well as for
courts. Traditionally, before the Court directed payment of tort compensation,
it had to be established by the claimants that the accident was due to the
fault of the person causing injury or damage. Now from different judicial
pronouncements, it shall appear that even in western countries fault is being
read and assumed as someone's negligence or carelessness. The Indian
Parliament, being conscious of the magnitude of the plight of the victims of
the accidents, have introduced several beneficial provisions to protect the interest
of the claimants and to enable them to claim compensation from the owner or the
insurance company in connection with the accident." The intention of the
Parliament became further evident when in the Motor Vehicles Act, 1939, a new
chapter being Chapter VIIA dealing with insurance of motor vehicles against
third party risks was introduced and the beneficent provisions contained in the
Motor Vehicles Act, 1939 were further made liberal by reason of the Motor
Vehicles Act, 1988 and the amendments carried out therein from time to time in
aid of the third party claims by way of grant of additional or new rights
conferred on the road accident victims.
the common law a person injured by reason of another person's wrongdoing had no
right of action against insurers who undertook to indemnify the wrongdoer. The
first invasion of this principle took place by reason Third Parties (Rights
against Insurers) Act, 1930. The British Parliament in the light of the
aforementioned Act enacted the Road Traffic Act, 1930 which has since been
replaced by Road Traffic Act, 1988.
Third Parties (Rights Against Insurers) Act 1930 was enacted with a view to
correct injustice effecting a statutory assignment of the rights of the assured
to the injured person as prior thereto the right of a person to be indemnified
under a contract of insurance against claims made against him by persons whom
he might have injured was one personal to himself, and there was no privity of
any sort between the injured person and the insurers. The injured person had no
interest either at law or in equity in the insurance money, either before or
after it was paid by the insurers to the assured. In a case where the assured
became bankrupt and if the injured person had not already obtained judgment and
levied execution of his claim for damages his only right was to move in the
bankruptcy or the winding-up of proceedings. The beneficial provisions of the
aforementioned English statutes were incorporated by the Parliament of India
while enacting the Motor Vehicles Act, 1939 which has also since been repealed
and replaced by the Motor Vehicles Act, 1988.
different types of insurance covers are issued containing different nature of
contract of insurance. We are, however, in this batch of cases mainly concerned
with third party right under the policy. Any condition in the insurance policy,
whereby the right of the third party is taken away, would be void.
such a benefit to a third party was provided under the Statute keeping in view
the fact that the conditions in the assured's policy may not be of no or little
effect in relation to a claim by a person to whom an assured was under a
compulsorily insurable liability.
this context, it is necessary to consider as to what is a third party right. A
third party claim arises when a victim of an accident suffers a bodily injury
or death as a result thereof or his property is damaged. An accident is not
susceptible to a very precise definition.
popular and ordinary sense of the word was "an unlooked-for mishap or an
untoward event which is not expected or designed". the word as an
"unintended occurrence which has an adverse physical result". The
Supreme Court of Canada in Pickford & Black Ltd. vs. Candian General
Insurance Co. [(1976) 2 Lloyd's Rep. 108], stated the law thus :- "The
meaning to be attached to the word "accident" as employed in the body
of an insurance policy was thoroughly explored by Mr. Justice Pigeon in the
reasons for judgment which he delivered on behalf of the majority of this Court
in The Canadian Indemnity Co. v. Walkem Machinery & Equipment Ltd., (1975)
D.L.R. (3d) 1. In the course of these reasons at p. 5 he adopted the views
expressed by Mr. Justice Freedman, in a dissenting opinion in the Court of
Appeal of Manitoba in Marshall Wells of Canada Ltd. v. Winnipeg Supply and
Fuel, R. Litz & Sons Co. v. Candian General Insurance Co., (1964) 49 W.W.R.
644 at p. 665 where that learned Judge said :
respect, I am of the view that what occurred here was an accident. One must
avoid the danger of construing that term as if it were equivalent to
"inevitable accident." That a mishap might have been avoided by the
exercise of greater care and diligence does not automatically take it out of
the range of accident. Expressed another way, "negligence" and
"accident" as here used are not mutually exclusive terms. They may
expressing the view that even an occurrence which is the result of a calculated
risk or of a dangerous operation may come within the meaning of the word
"accident", Mr. Justice Pigeon went on to say at p. 6 :
it is true that the word "accident" is sometimes used to describe
unanticipated or unavoidable occurrences, no dictionary need be cited to show
that in every day use, the word is applied as Halsbury says...to any unlooked
for mishap or occurrence...this is the proper test..." In Halsbury's Laws
of England, Fourth Edition Reissue, it is stated:
injury caused by the willful or even criminal act of a third person, provided
the assured is not a party or privy to it, is to be regarded as accidental for
the purposes of the policy, since from the assured's point of view it is not
expected or designed." In Colinvaux's Law of Insurance (6th Edition) page
304, the following illustration is given :
a man walks and stumbles, thus spraining his ankle, the injury is accidental
for while he intends to walk he does not intend to stumble. In Hamlyn v. Crown
Accidental Insurance the assured's injury was due to stooping forward to pick
up a marble dropped by a child as it rolled from him. He stood with his legs
together, separated his knees, leaned forward and made a grab at the marble,
and in doing so wrenched his knee. The injury was held by the Court of Appeal
to be accidental, on the ground that the assured did not intend to get into
such a position that he might wrench his knee." At para 17-13 of the said
treatise it is stated :
includes negligence It makes no difference that the accident was caused by the
negligence of the assured (as opposed to his intentional act). Thus there is an
accident where the assured crosses a railway line without exercising due care
and is knocked down by an approaching train. In fact, one of the commonest
causes of accidents is negligence, and an accident policy applies, excepted
perils apart, whether the injury is caused by the negligent act of the assured
himself or of a third party." A right of the victim of a road accident to
claim compensation is a statutory one. He is a victim of an unforeseen
situation. He would not ordinarily have a hand in it. The negligence on the
part of the victim may, however, be contributory. He has suffered owing to
wrongdoing of others.
accident may ruin an entire family. It may take away the only earning member. An
accident may result in the loss of her only son to a mother. An accident may
take place for variety of reasons. The driver of a vehicle may not have a hand
in it. He may not be found to be negligent in a given case.
factors such as unforeseen situation, negligence of the victim, bad road or the
action or inaction of any other person may lead to an accident.
person suffering grievous bodily injury may require money for his
survival/medical treatment. Statutory compensation paid to the next of kin of
the victim of an accident may, thus, bring to a large number of families the
only ray of light at the end of the tunnel.
other words, what would also be covered by the contract of insurance vis-`-vis
the beneficent statutory provisions like Sub-Section (2) of Section 149 of the
said Act would be when a death or bodily injury has been caused as a result of assured's
own voluntary act. Even an unforeseeable result of assured's deliberate act may
come within the purview of the accident. Even if an accident has occurred due
to negligent driving of the assured person, it may not prevent recovery under
the policy and certainly thereby a third party would not be non-suited.
we may notice that in C.M. Jaya's case (supra), a Constitution Bench of this
Court held that the liability of the insurer will have to be determined having
regard to the question as to whether any extra premium is paid or not. It was observed
said decision cannot be read as laying down that even though the liability of
the Insurance Company is limited to the statutory requirement, an unlimited or
higher liability can be imposed on it. The liability could be statutory or
contractual. A statutory liability cannot be more than what is required under
the statute itself.
there is nothing in Section 95 of the Act prohibiting the parties from
contracting to create unlimited or higher liability to cover wider risk. In
such an event, the insurer is bound by the terms of the contract as specified
in the policy in regard to unlimited or higher liability as the case may be. In
the absence of such a term or clause in the policy, pursuant to the contract of
insurance, a limited statutory liability cannot be expanded to make it
unlimited or higher. If it is so done, it amounts to rewriting the statute or
the contract of insurance which is not permissible." For the
aforementioned reasons, the provisions contained in Chapter XI of the Motor
Vehicles Act, 1988 must be construed in that light.
(1) of Section 149, casts a liability upon the insurer to pay to the person
entitled to the benefit of the decree as if he were the judgment debtor.
Although the said liability is subject to the provision of this section, it
prefaces with a non-obstante clause that the insurer may be entitled to avoid
or cancel or may have avoided or cancelled the policy. Furthermore, the statute
raises a legal fiction to the effect that for the said purpose the insurer
would be deemed to be judgment debtor in respect of the liability of the insurer.
Laws of England, Fourth Edition Reissue, Volume 25, it is stated:
Benefits conferred on third parties by the Road Traffic Act, 1930. It was
against the background of the Third Parties (Rights against Insurers) Act 1930
that the Road Traffic Act 1930 (now replaced by the Road Traffic Act 1988), was
passed. It was realised that, unless some alterations were made in the rights
to which the third party was by the first-named Act subrogated, those rights
would frequently be of little, if any, value. Accordingly, it was provided that
certain conditions in the assured's policy were to be of no effect in relation
to a claim by a person to whom an assured was under a compulsorily insurable
liability. The conditions to that extent avoided are any conditions providing
(1) that no liability is to arise, or (2) that any liability which has arisen
is to cease, in the event of some specified thing being done, or omitted to be
done, after the occurrence of the event giving rise to the claim. If, therefore,
any admission of liability is made after an accident contrary to a condition in
the policy, or if, contrary to a condition in the policy, proper notice of the
accident is not given to the insurers, the injured third party is not affected
so far as his claim is concerned." This Court in Nicolletta Rohtagi
(supra) which has since been reported in [(2003) 1 SCR 567] in no uncertain
terms held that the defence available to an insurance company would be a
question as to whether an insurer can avoid its liability in the event it
raises a defence as envisaged in Sub-section (2) of Section 149 of the Act
corresponding to sub-section (2) of Section 96 of the Motor Vehicles Act, 1939
had been the subject matter of decisions in a large number of cases.
beyond any doubt or dispute that under Section 149(2) of the Act an insurer, to
whom notice of the bringing of any proceeding for compensation has been given,
can defend the action on any of the grounds mentioned therein.
Clause (a) opens with the words "that there has been a breach of a
specified condition of the policy", implying that the insurer's defence of
the action would depend upon the terms of the policy. The said sub-clause
contains three conditions of disjunctive character, namely, the insurer can get
away from the liability when
named person drives the vehicle;
was being driven by a person who did not have a duly granted licence; and
is a person disqualified for holding or obtaining a driving licence.
also take note of the fact that whereas in Section 3 the words used are
'effective licence', it has been differently worded in Section 149(2) i.e. '
duly licensed'. If a person does not hold an effective licence as on the date
of the accident, he may be liable for prosecution in terms of Section 141 of
the Act but Section 149 pertains to insurance as regard third party risks.
provision of a statute which is penal in nature vis-`-vis a provision which is
beneficent to a third party must be interpreted differently. It is also well
known that the provisions contained in different expressions are ordinarily
words 'effective licence' used in Section 3, therefore, in our opinion cannot
be imported for sub-section (2) of Section 149 of the Motor Vehicles Act. We
must also notice that the words 'duly licensed' used in sub-section (2) of
Section 149 are used in past tense.
a person whose licence is ordinarily renewed in terms of the Motor Vechiles Act
and the rules framed thereunder despite the fact that during the interregnum
period, namely, when the accident took place and the date of expiry of the licence,
he did not have a valid licence, he could during the prescribed period apply
for renewal thereof and could obtain the same automatically without undergoing
any further test or without having been declared unqualified therefor. Proviso
appended to Section 14 in unequivocal term states that the licence remains
valid for a period of thirty days from the day of its expiry.
15 of the Act does not empower the authorities to reject an application for
renewal only on the ground that there is a break in validity or tenure of the
driving licence has lapsed as in the meantime the provisions for
disqualification of the driver contained in Sections 19, 20, 21, 22, 23 and 24
will not be attracted, would indisputably confer a right upon the person to get
his driving licence renewed. In that view of the matter he cannot be said to be
delicensed and the same shall remain valid for a period of thirty days after
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.
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 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) 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.
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.
breach on the part of the insurer must be established by the insurer to show
that not only the insured used or caused or permitted to be used the vehicle in
breach of the Act but also that the damage he suffered flowed from the breach.
the Motor Vehicles Act, holding of a valid driving licence is one of the
conditions of contract of insurance. Driving of a vehicle without a valid licence
is an offence. However, the question herein is whether a third party involved
in an accident is entitled to the amount of compensation granted by the Motor
Accidents Claims Tribunal although the driver of the vehicle at the relevant
time might not have a valid driving licence but would be entitled to recover
the same from the owner or driver thereof.
trite that where the insurers relying upon the provisions of violation of law
by the assured takes an exception to pay the assured or a third party, they
must prove a wilful violation of the law by the assured. In some cases
violation of criminal law, particularly, violation of the provisions of the
Motor Vehicles Act may result in absolving the insurers but, the same may not
necessarily hold good in the case of a third party. In any event, the exception
applies only to acts done intentionally or "so recklessly as to denote
that the assured did not care what the consequences of his act might be".
case (supra), a Division Bench of this Court observed :
insurance company complains of breach of a term of contract which would permit
it to disown its liability under the contract of insurance. If a breach of term
of contract permits a party to the contract to not to perform the contract, the
burden is squarely on that party which complains of breach to prove that the
breach has been committed by the other party to the contract. The test in such
a situation would be who would fail if no evidence is led..." In Skandia's
case (supra), this Court held :
96(2)(b)(ii) extents immunity to the insurance company if a breach is committed
of the 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
from holding or obtaining driving licence during the period of disqualification.
The expression "breach" is of great significance. The dictionary
meaning of "breach" is "infringement or violation of a promise
or obligation" (See Collins English Dictionary). It is, therefore,
abundantly clear that the insurer will have to establish that the insured is
guilty of an infringement or violation of the promise that a person who is duly
licensed will have to be in charge of the vehicle. The very concept of
infringement or violation of the promise that the expression "breach"
carries within itself induces an inference that the violation or infringement
or violation. If the insured is not at all at fault and has not done anything
he should not have done or is not amiss in any respect, how can it be conscientously
posited that he has committed a breach ? It is only when the insured himself
places the vehicle in charge of a person who dies not hold a driving licence,
that it can be said that he is "guilty" of the breach of the promise
that the vehicle will be driven by a licensed driver. It must be established by
the insurance company that the breach was on the part of the insured and that
it was the insured who was guilty of violating the promise or infringement of
the contract. Unless the insured is at fault and is guilty of a breach, the insurer
cannot escape from the obligation to indemnify the insured and successfully
contented that he is exonerated having regard to the fact that the promisor
(the insured) committed a breach of his promise. Not when some mishap occurs by
some mischance. When the insured has done everything within his power inasmuch
as he has engaged a licensed driver and has placed the vehicle in charge of a
licensed driver, with the express or implied mandate to drive it himself, it
cannot be said that the insured is guilty of any breach." In B.V. Nagaraju
vs. M/s Oriental Insurance Co. Ltd. [AIR 1996 SC 2054], Punchhi, J. speaking
for the Division Bench followed Skandia (supra) and read down the exclusionary
term of the insurance policy to serve the main purpose thereof, holding :
National Commission went for the strict construction of the exclusion clause.
The reasoning that the extra passengers being carried in the goods vehicle
could not have contributed, in any manner, to the occurring of the accident,
was barely noticed and rejected sans any plausible account; even when the claim
confining the damage to the vehicle only was limited in nature. We, thus, are
of the view in accord with the Skandia's case (AIR 1987 SC 1184), the aforesaid
exclusion term of the insurance policy must be read down so as to serve the
main purpose of the policy that is indemnify the damage caused to the vehicle,
which we hereby do." A contract of insurance also falls within the realm
of contract. Thus, like any other contract, the intention of the parties must
be gathered from the expressions used therein.
in his treatise 'Fire and Motor Insurance' (2nd Edition) at page 272-273
narrated an interesting case concerning Employment of "under age"
driver in Sweeney vs. Kennedy [(1948), 82, L.I.L. Rep. 294 at 297] as under :
Sweeney vs. Kennedy the proposer in answer to a question stating "Are any
of your drivers under twenty-one years of age or with less than twelve months'
experience" replied "No". One of the lorries covered by the policy
was involved in an accident whilst it was being unloaded, and a third pqrty was
fatally injured. At the time of the accident it was being driven by the
insured's son, who had twelve months' driving experience but was under
twenty-one. When a claim for an indemnity was made against the insurance
company, payment was refused on the ground that the employment of a driver under
twenty-one years of age amounted to such an alteration in the character of the
risk as would avoid the policy.
Moore, J., giving judgment in the Eire Divisional Court, rejected this argument and held that the company was
liable. He said that whether a change of risk was so great as to avoid an
insurance must always be a question of degree and a question of the opinion of
the Court on the circumstances of the case. He could see a vast difference
between the risks involved in insuring a merchantman and a privateer; a smaller
but still very substantial difference between the risk involved in insuring an
explosive and non-explosive demolition; and a very exiguous difference between
the risks of insuring when a driver was under or over twenty-one.
then observed :
law provides that licences to drive motor vehicles may be given to persons of
specified ages, the ages varying with the class of the vehicle; and when a
person is driving a vehicle of the category which by his age he is entitled to
drive, there is, I think, some presumption that, as far as age reflects on
competency, he is competent to drive it. Certainly this would be an honest and
reasonable view for an insured person to take in a case where he had not been
expressly limited by the terms of the policy to the employment of drivers over
21. Certain categories of vehicles may not, by law, be driven by persons under
21, and as the framework of the proposal form was apt to cover an application
for insurance of such vehicle, he might reasonably consider that Q.9 was
designed to all attention to this fact. If insurers take a different view as to
the proposer age of drivers from the view of the law, it is open to them -
indeed, I would say incumbent upon them - to make this clear by the insertion
of specific provisions in the policy and not attempt to secure their ends by a
side wind. I hold that there was no such alteration in the subject-matter of
the insurance as would or could avoid the policy." In the event the terms
and conditions of policy are obscure it is permissible for the purpose of
construction of the deed to look to the surrounding circumstances as also the
conduct of the parties.
Oriental Insurance Co. Ltd. vs. Sony Cheriyan [(1999) 6 SCC 451], it has been held
insurance policy between the insurer and the insured represents a contract
between the parties. Since the insurer undertakes to compensate the loss
suffered by the insured on account of risks covered by the insurance policy,
the terms of the agreement have to be strictly construed to determine the
extent of liability of the insurer. The insured cannot claim anything more than
what is covered by the insurance policy. That being so, the insured has also to
act strictly in accordance with the statutory limitations or terms of the
policy expressly set out therein." Yet in Oriental Insurance Co. Ltd. vs. Samayanallur
Primary Agricultural Co-op. Bank [AIR 2000 SC 10], this Court laid down the law
in the following terms :
State Commission appreciated the real controversy between the parties and
decided the dispute on interpretation of the insurance policies and the
proposal produced before the District Forum. There was no necessity of
referring to the dictionaries for understanding the meaning of the word 'safe'
which the parties in the instant case are proved to have understood while
submitting the proposal and accepting the insurance policy. The cashier's box
could not be equated with the safe within the meaning of the insurance policy.
alleged burglary and the removal of the cash box containing the jewellery and
cash was not covered by the insurance policy between the parties. The insurance
policy has to be construed having reference only to the stipulations contained
in it and no artificial far fetched meaning could be given to the words
appearing in it." The courts also readily apply the doctrine of waiver in favour
of the insured and against the insurer.
insurer's liability arises both from contract as well as statute. It will,
therefore, may not be proper to apply the rules for interpretation of a
contract for interpreting a statute.
correctness of the decision rendered in Skandia's case (supra) was questioned
and the matter was referred to a three-Judge Bench to which we shall advert to
a little later.
case (supra) relied on behalf of the petitioner is of not much assistance.
Therein this Court was dealing with peculiar fact situation obtaining therein.
In that case the insured admittedly did not have any driving licence and in
that situation, the insurance company was held to be not liable. The Bench
noticed the purported conflict between the two sets of decisions but did not
refer the matter to a larger Bench. It merely distinguished the cases on their
own facts stating :
the circumstances, when the insured had handed over the vehicle for being
driven by an unlicensed driver, the Insurance Company would get exonerated from
its liability to meet the claims of the third party who might have suffered on
account of vehicular accident caused by such unlicensed driver. In view of the
aforesaid two sets of decisions of this Court, which deal with different fact
situations, it cannot be said that the decisions rendered by this Court in Skandia
Insurance Co. Ltd. v. Kokiolaben Chandravadan and the decision of the Bench of
three learned Judges in Sohan Lal in any way conflict with the decisions
rendered by this Court in the cases of New India Assurance Co. Ltd. vs. Mandar Madhav
Tambe and Kashiram Yadav v. Oriental Fire & General Insurance Co."
There may be a case where an accident takes place without there being fault on
the part of the driver. In such an event, the question as to whether a driver
was holding a valid licence or not would become redundant. (See Jitendra Kumar
vs. Oriental Insurance Co. Ltd. & Anr. - J.T. 2003 (5) SC 538]. Skandia
(supra), on the other hand, has been approved by a three- Judge Bench, when the
correctness thereof was referred to a larger Bench in Sohan Lal Passi's case
(supra), wherein a three-Judge Bench of this Court noticed the ratio propounded
in Skandia's case (supra) and observed :
other words, once there has been a contravention of the condition prescribed in
sub-section (2)(b)(ii) of Section 96, the person insured shall not be entitled
to the benefit of sub-section (1) of Section 96. 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 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 ?
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..." A bare perusal of the provisions of Section 149 of
the Act leads to only one conclusion that usual rule is that once the assured
proved that the accident is covered by the compulsory insurance clause, it is
for the insurer to prove that it comes within an exception.
on Insurance Law it is stated:
Burden of Proof: Difficulties may arise in connection with the burden of
proving that the facts of any particular case fall within this exception. The
usual rule is that once the assured has proved that the case comes within the
general risk, it is for the insurers to prove that it comes within an
exception. It has therefore been suggested in some American decisions that,
where the insurers prove only that the assured exposed himself to danger and
there is no evidence to show why he did so, they cannot succeed, because they
have not proved that his behaviour was voluntary or that the danger was
unnecessary. Since an extremely heavy burden is imposed on the insurers if they
have to prove the state of mind of the assured, it has been suggested in
Canadian decisions that the court should presume that the assured acted
voluntarily and that, where he does an apparently dangerous and foolish act,
such danger was unnecessary, until the contrary is shown. In practical terms,
therefore, the onus does in fact lie on the claimant to explain the conduct of
the assured where there is not apparent reason for exposing himself to an
obvious danger." In Rukmani and Others vs. New India Assurance Co. Ltd.
and Others [1999 ACJ 171], this Court while upholding the defences available to
the insurer to the effect that vehicle in question was not being driven by a person
holding a licence, held that the burden of the insurer would not be discharged
when the evidence which was brought on record was that the Inspector of Police
in his examination in chief merely stated, "My enquiry revealed that the
respondent No.1 did not produce the licence to drive the abovesaid scooter. The
respondent No.1 even after my demand did not submit the licence since he was
not having it."
proposition of law is no longer res integra that the person who alleges breach
must prove the same. The insurance company is, thus, required to establish the
said breach by cogent evidence. In the event, the insurance company fails to
prove that there has been breach of conditions of policy on the part of the insured,
the insurance company cannot be absolved of its liability. (See Sohan Lal Passi
(supra) Apart from the above, we do not intend to lay down anything further
i.e. degree of proof which would satisfy the aforementioned requirement
inasmuch as the same would indisputably depend upon the facts and circumstances
of each case. It will also depend upon the terms of contract of insurance .
Each case may pose different problem which must be resolved having to a large
number of factors governing the case including conduct of parties as regard
duty to inform, correct disclosure, suppression, fraud on the insurer etc. It
will also depend upon the fact as to who is the owner of the vehicle and the
circumstances in which the vehicle was being driven by a person having no valid
and effective licence. No hard and fast rule can therefor be laid down. If in a
given case there exists sufficient material to draw an adverse inference
against either the insurer or the insured, the Tribunal may do so. The parties
alleging breach must be held to have succeeded in establishing the breach of
conditions of contract of insurance on the part of the insurer by discharging
its burden of proof. The Tribunal, there cannot be any doubt, must arrive at a
finding on the basis of the materials available on records.
aforementioned backdrop, the provisions of sub-sections (4) and (5) of Section
149 of the Motor Vehicles Act, 1988 may be considered as the liability of the
Insurer to satisfy the decree at the first instance.
beneficent statute, as is well known, must receive a liberal interpretation
[See Bangalore Water Supply & Sewerage Board etc. vs. A. Rajappa and Others
etc. [(1978) 2 SCC 213], Steel Authority of India Ltd. and Others vs. National
Union Waterfront Workers and Others [(2001) 7 SCC 1], ITI Ltd. vs. Siemens
Public Communications Network Ltd. [(2002) 5 SCC 510], Amrit Bhikaji Kale and
Others vs. Kashinath Janardhan Trade and Another [(1983) 3 SCC 437] and Kunal
Singh vs. Union of India and Another [(2003) 4 SCC 524].
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.
Laws of England, Fourth Edition Reissue, Volume 25, it is stated:
Judgments required to be satisfied. The first condition of the obligation of
the insurers to pay on a judgment is that there is a judgment.
Second condition is that the judgment must be in respect of a liability which
is required to be covered by compulsory insurance. In other words, the only
person who can maintain a right of action direct against the insurers is a
person falling within the class of third parties whose bodily injury or death
or damage to whose property is required to be covered by a motor policy.
third condition is that the liability is, in fact, covered by the terms of the
policy, or would be covered but for the fact that the insurer is entitled to
avoid or cancel, or has avoided or cancelled, the policy. For this purpose,
conditions declared to be invalid as against a third party are ignored, but if,
even after ignoring all such conditions, the relevant use of the vehicle puts
it outside the scope of the policy, the insurers are left immune. The most
important clause in this connection is the 'description of use' clause. The
assured is criminally liable if he uses his car for purposes outside the scope
of his insurance and, in addition to his criminal liability, he has to bear
unaided the cost of compensating third parties injured by his use if he is
negligent. Subject to the statutory provision rendering certain conditions
invalid against third parties, the insurers are not obliged to carry a wider
scope of liability that they have agreed by their policy to carry.
fourth condition is that the judgment must be against a person insured by the
policy. This language covers a permitted driver as well as the person by whom
the policy has been effected." As has been held in Sohan Lal Passi
(supra), the insurance company cannot shake off its liability to pay the
compensation only by saying that at the relevant point of time the vehicle was
driven by a person having no licence.
where a liability has been established by a judgment, it is not permissible to
look beyond the determination in order to establish the basis of the liability.
149(2) relates to the liability of the insurer and speaks of a situation in
regard to which no sum shall be payable by an insurer to whom notice of
bringing of any such proceeding is given, could defend the action stated in the
said statutory provision. The contention in the context would be found in
section 149(2)(a) in the event of a breach of a specified condition of the
policy enabling the insurer to avoid liability in regard thereto. In the
process in regard to the right of the insurer to recover the amount from the
insured, it would have to be seen by referring to section 149(4) successfully
recovered from the insured.
149(4) says that where a certificate of insurance is issued, so much of the
said policy as purports to restrict the insurance of the persons insured
thereby by referring to any of the conditions mentioned and it is precisely
enacted in regard thereto and that the liability covered by section 2(b) as are
required to be covered by the policy would not be available. The position is
made further clear by the provisions enacting that any sum paid by the insurer
in or towards the discharge of any liability of any person who is covered by
the policy by virtue of this sub-section shall be recoverable by the insurer
from that person.
other words, section 149(4) considers the right of the insurance company in
regard to re-imbursement of the amount paid by them only in the context of a
situation other than the one contemplated under Section 149(2)(b).
would mean that except under the situation provided by section 149(2)(b), the
insurer would not be in a position to avoid the liability because he has got
rights against the owner under the above provision.
learned counsel strenuously submitted that this would not be the correct
understanding and interpretation of the statutory provisions of section 149 of
the 1988 Act.
learned counsel submitted that to read the statutory provision to understand
that the insurance company could only claim from the owner in situations
governed by section 149(2)(b) and to have no right under the said provision
with regard to other situations under section 149(2)(a) would not be the proper
reading of the statutory provision. The learned counsel submitted that in fact
the provision would have to be meaningfully understood. It is not possible to
consider the submission of the learned counsel in the light of the plain
language of the statutory provision. It is necessary to emphasise that under
the new Act the burden of the insurance company has been made heavier in the
context of controlling the need of taking up contentions to legally avoid the
liabilities of the insurance company." The social need of the victim being
compensated as enacted by the Parliament was the subject matter of
consideration before a three-Judge Bench of this Court as early as in 1959 in
British India General Insurance Co. Ltd. vs. Captain Itbar Singh and Others
[(1960) 1 SCR 168], wherein Sarkar, J speaking for the Bench observed :
we find the contention wholly unacceptable. The Statute has no doubt created a
liability in the insurer to the injured person but the statute has also
expressly confined the right to avoid that liability to certain grounds
specified in it. It is not for us to add to those grounds and therefore to the
statute for reasons of hardship. We are furthermore not convinced that the
statute causes any hardship. First, the insurer has the right, provided he has
reserved it by the policy, to defend the action in the name of the assured and
if he does so, all defences open to the assured can then be urged by him and
there is no other defence that he claims to be entitled to urge. He can thus
avoid all hardship if any, by providing for a right to defend the action in the
name of the assured and this he has full liberty to do. Secondly, if he has
been made to pay something which on the contract of the policy he was not bound
to pay, he can under the proviso to sub-s.(3) and under sub-s.(4) recover it
from the assured. It was said that the assured might be a man of straw and the
insurer might not be able to recover anything from him. But the answer to that
is that it is the insurer's bad luck. In such circumstances the injured person
also would not have been able to recover the damages suffered by him from the
assured, the person causing the injuries...
view has been taken in Skandia's case (supra), Sohan Lal Passi's case (supra), Kashiram
Yadav and Another vs. Oriental Fire and General Insurance Co. Ltd. and Others
[(1989) 4 SCC 128] and several others.
case (supra), a Division Bench of this Court summed up the legal position :
position can be summed up thus :
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
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 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." The submissions made on behalf of the
petitioner may now be noticed. According to the learned counsel, sub-section
(4) of Section 149 deals with the situation where the insurer in the policy
purports to restrict the insurance of the persons insured thereby by reference
to any condition other than those in clause (b) of sub-section (2) of Section
149 and in that view of the matter no liability is covered for driving of a
vehicle without licence or fake licence. The submission ignores the plain and
unequivocal expression used in sub-section (2) of Section 149 as well as the
proviso appended thereto. With a view to construe a statute the scheme of the
Act has to be taken into consideration. For the said purpose the entire Act has
to be read as a whole and then chapter by chapter, section by section and word
by word. [See Reserve Bank of India etc. vs. Peerless General Finance and
Investment Co. Ltd. and others [(1987) 1 SCC 424 Para 33].
appended to sub-section (4) of Section 149 is referable only to sub-section (2)
of Section 149 of the Act. It is an independent provision and must be read in
the context of Section 96(4) of the Motor Vehicles Act, 1939. Furthermore, it
is one thing to say that the insurer will be entitled to avoid its liability
owing to breach of terms of a contract of insurance but it is another thing to
say that the vehicle is not insured at all. If the submission of the learned
counsel for the petitioner is accepted, the same would render the proviso to
sub-section (4) as well as sub-section (5) of Section 149 of the Act otiose,
nor any effective meaning can be attributed to the liability clause of the
insurance company contained in sub-section (1). The decision in Kamla's case
(supra) has to be read in the aforementioned context.
(5) of Section 149 which imposes a liability on the insurer must also be given
its full effect. The insurance company may not be liable to satisfy the decree
and, therefore, its liability may be zero but it does mean that it did not have
initial liability at all. Thus, if the insurance company is made liable to pay
any amount, it can recover the entire amount paid to the third party on behalf
of the assured. If this interpretation is not given to the beneficent
provisions of the Act having regard to its purport and object, we fail to see a
situation where beneficent provisions can be given effect to.
(7) of Section 149 of the Act, to which pointed attention of the Court has been
drawn by the learned counsel for the petitioner, which is in negative language
may now be noticed. The said provision must be read with sub-section (1)
thereof. The right to avoid liability in terms of sub- section (2) of Section
149 is restricted as has been discussed hereinbefore.
one thing to say that the insurance companies are entitled to raise a defence
but it is another thing to say that despite the fact that its defence has been
accepted having regard to the facts and circumstances of the case, the Tribunal
has power to direct them to satisfy the decree at the first instance and then
direct recovery of the same from the owner. These two matters stand apart and
require contextual reading.
ADMITTEDLY NO LICENCE WAS OBTAINED BY A DRIVER:
have analysed the relevant provisions of the said Act in terms whereof a motor
vehicle must be driven by a person having a driving licence. The owner of a
motor vehicle in terms of Section 5 of the Act has a responsibility to see that
no vehicle is driven except by a person who does not satisfy the provisions of
Section 3 or 4 of the Act. In a case, therefore, where the driver of the
vehicle admittedly did not hold any licence and the same was allowed
consciously to be driven by the owner of the vehicle by such person, the
insurer is entitled to succeed in its defence and avoid liability. The matter,
however, may be different where a disputed question of fact arises as to
whether the driver had a valid licence or where the owner of the vehicle
committed a breach of the terms of the contract of insurance as also the
provisions of the Act by consciously allowing any person to drive a vehicle who
did not have a valid driving licence. In a given case, the driver of the vehicle
may not have any hand at all, e.g. a case where an accident takes place owing
to a mechanical fault or vis-major. [See Jitendra Kumar (supra)] In V. Mepherson
vs. Shiv Charan Singh [1998 ACJ 601 (Del.)] the owner of the vehicle was held
not to be guilty of violating the condition of policy by willfully permitting
his son to drive the car who had no driving licence at the time of accident. In
that case, it was held that the owner and insurer both were jointly and
India Assurance Co. Ltd. vs. Jagtar Singh and Others [1998 ACJ 1074], Hon'ble
M. Srinivasan, CJ, as His Lordship then was, dealing with the case where a duly
licensed driver was driving a vehicle but there was a dispute as to who was
driving the vehicle. In that case the court referred to the judgment in Kashiram
Yadav vs. Oriental Fire & General Insurance Co. Ltd. [1989 ACJ 1078 (SC)]
and expressed its agreement with the views taken therein.
National Insurance Co. Ltd. vs. Ishroo Devi and Others [1999 ACJ 615] where there
was no evidence that the society which employed the driver was having knowledge
that the driver was not holding a valid licence, it was held the insurance
company is liable. The court relied upon the decisions of this Court in Kashiram
Yadav's case (supra), Skandia's case (supra) and Sohan Lal Passi's case
THE PERSON HAS BEEN GRANTED LICENCE FOR ONE TYPE OF VEHICLE BUT AT THE RELVANT
TIME HE WAS DRIVING ANOTHER TYPE OF VECHILE:
10 of the Act provides for forms and contents of licences to drive. The licence
has to be granted in the prescribed form. Thus, a licence to drive a light
motor vehicle would entitle the holder there to drive the vehicle falling
within that class or description.
3 of the Act casts an obligation on a driver to hold an effective driving licence
for the type of vehicle which he intends to drive. Section 10 of the Act
enables Central Government to prescribe forms of driving licences for various
categories of vehicles mentioned in sub-section (2) of said section. The
various types of vehicles described for which a driver may obtain a licence for
one or more of them are
Motorcycle without gear,
vehicle of other specified description.
definition clause in Section 2 of the Act defines various categories of
vehicles which are covered in broad types mentioned in sub- sectionh (2) of
Section 10. They are `goods carriage', `heavy-goods vehicle', `heavy passenger
motor-vehicle', `invalid carriage', `light motor-vehicle', `maxi-cab',`medium
goods vehicle', `medium passenger motor-vehicle', `motor-cab', `motorcycle',
`omnibus', `private service vehicle', `semi-trailer', `tourist vehicle',
`tractor', `trailer', and `transport vehicle'. In claims for compensation for
accidents, various kinds of breaches with regard to the conditions of driving licences
arise for consideration before the Tribunal. A person possessing a driving licence
for `motorcycle without gear', for which he has no licence. Cases may also
arise where a holder of driving licence for `light motor vehicle' is found to
be driving a `maxi-cab', `motor-cab' or `omnibus' for which he has no licence.
In each case on evidence led before the tribunal, a decision has to be taken
whether the fact of the driver possessing licence for one type of vehicle but
found driving another type of vehicle, was the main or contributory cause of
accident. If on facts, it is found that accident was caused solely because of
some other unforeseen or intervening causes like mechanical failures and
similar other causes having no nexus with driver not possessing requisite type
of licence, the insurer will not be allowed to avoid its liability merely for
technical breach of conditions concerning driving licence.
have construed and determined the scope of sub-clause (ii) of sub- section(2)
of section 149 of the Act. Minor breaches of licence conditions, such as want
of medical fitness certificate, requirement about age of the driver and the
like not found to have been the direct cause of the accident, would be treated
as minor breaches of inconsequential deviation in the matter of use of
vehicles. Such minor and inconsequential deviations with regard to licensing
conditions would not constitute sufficient ground to deny the benefit of
coverage of insurance to the third parties.
pleas of breach of licensing conditions taken by the insurer, it would be open
to the tribunal to adjudicate the claim and decide inter se liability of
insurer and insured; although where such adjudication is likely to entail undue
delay in decision of the claim of the victim, the tribunal in its discretion
may relegate the insurer to seek its remedy of reimbursement from the insured
in the civil court.
THE DRIVER'S LICENCE IS FOUND TO BE FAKE:
be true as has been contended on behalf of the petitioner that a fake or forged
licence is as good as no licence but the question herein, as noticed
hereinbefore, is whether the insurer must prove that the owner was guilty of
the wilful breach of the conditions of the insurance policy or the contract of
insurance. In Lehru's case (supra), the matter has been considered at some
details. We are in general agreement with the approach of the Bench but we
intend to point out that the observations made therein must be understood to
have been made in the light of the requirements of law in terms whereof the
insurer is to establish wilful breach on the part of the insured and not for
the purpose of its disentitlement from raising any defence or the owners be
absolved from any liability whatsoever. We would be dealing in some details
with this aspect of the matter a little later.
Vehicles Act, 1988 provides for grant of learner's licence. [See Section 4(3),
Section 7(2), Section 10(3) and Section 14]. A learner's licence is, thus, also
a licence within the meaning of the provisions of the said Act. It cannot,
therefore, be said that a vehicle when being driven by a learner subject to the
conditions mentioned in the licence, he would not be a person who is not duly
licensed resulting in conferring a right on the insurer to avoid the claim of
the third party. It cannot be said that a person holding a learner's licence is
not entitled to drive the vehicle. Even if there exists a condition in the
contract of insurance that the vehicle cannot be driven by a person holding a
learner's licence, the same would run counter to the provisions of Section
149(2) of the said Act.
provisions contained in the said Act provide also for grant of driving licence
which is otherwise a learner's licence. Section 3(2) and 6 of the Act provides
for the restriction in the matter of grant of driving licence, Section 7 deals
with such restrictions on granting of learner's licence.
8 and 9 provide for the manner and conditions for grant of driving licence.
Section 15 provides for renewal of driving licence. Learner's licences are
granted under the rules framed by the Central Government or the State
Governments in exercise of their rule making power. Conditions are attached to
the learner's licences granted in terms of the statute. A person holding
learner's licence would, thus, also come within the purview of "duly licensed"
as such a licence is also granted in terms of the provisions of the Act and the
rules framed thereunder. It is now a well-settled principle of law that rules
validly framed become part of the statute. Such rules are, therefore, required
to be read as a part of main enactment. It is also well- settled principle of
law that for the interpretation of statute an attempt must be made to give
effect to all provisions under the rule. No provision should be considered as surplusage.
Madhav Tambe's case (supra), whereupon the learned counsel placed reliance, has
no application to the fact of the matter. There existed an exclusion clause in
the insurance policy wherein it was made clear that the Insurance Company, in
the event of an accident, would be liable only if the vehicle was being driven
by a person holding a valid driving licence or a permanent driving licence
"other than a learner's licence". The question as to whether such a
clause would be valid or not did not arise for consideration before the Bench
in the said case. The said decision was rendered in the peculiar fact situation
it was stated that "a driving licence" as defined in the Act is
different from a learner's licence issued under Rule 16 of the Motor Vehicles
Rules, 1939 having regard to the factual matrix involved therein.
question which arises for consideration in these petitions did not arise there.
Neither the same were argued at the Bar nor the binding precedents were
considered. Mandar Madhav Tambe's case (supra), therefore, has no application
to the facts of these cases nor create any binding precedent. The view we have
taken is in tune with the judgments rendered by different High Courts
consistently. [See for example New India
of Mr. Salve that there exists a conflict in the decisions of this Court in Nicolletta
Rohtagi (supra) on the one hand and Kamla (supra) and Lehru (supra) on the
other cannot be accepted. We do not find in the said decisions any such conflict.
Rohtagi (supra) was a case where a question arose as to whether an appeal by
the insurer on the ground de'hors those contained in Section 149(2) would be
maintainable. It was held not to be. There cannot be any doubt or dispute that defences
enumerated in Section 149(2) would be available to the insurance companies, but
that does not and cannot mean that despite such defences having not been established,
they would not be liable to fulfil their statutory obligation under sub-section
(1) of Section 149 of the Act.
as the purported conflict in the judgments of Kamla (supra) and Lehru (supra)
is concerned, we may wish to point out that the defence to the effect that the licence
held by the person driving the vehicle was a fake one, would be available to
the insurance companies, but whether despite the same, the plea of default on
the part of the owner has been established or not would be a question which
will have to be determined in each case.
court, however, in Lehru (supra) must not read that an owner of a vehicle can
under no circumstances has any duty to make any enquiry in this respect. The
same, however, would again be a question which would arise for consideration in
each individual case.
submission of Mr. Salve that in Lehru's case (supra), this Court has, for all
intent and purport, taken away the right of insurer to raise a defence that the
licence is fake does not appear to be correct. Such defence can certainly be
raised but it will be for the insurer to prove that the insured did not take
adequate care and caution to verify the genuineness or otherwise of the licence
held by the driver.
attention has also been drawn on an unreported order of this Court in Malla Prakasarao
vs. Malla Janaki & Ors. (Civil Appeal No. 163 of 1996 disposed of on 6th
August, 2002) which reads as under:
is not disputed that the driving licence of the driver of the vehicle had
expired on 20th
November, 1982 and the
driver did not apply for renewal within 30 days of the expiry of the said licence,
as required under Section 11 of the Motor Vehicles Act, 1939. It is also not
disputed that the driver of the vehicle did not have driving licence when the
accident took place. According to the terms of contract, the Insurance Company
has no liability to pay any compensation where an accident takes places by a
vehicle driven by a driver without driving licence. In that view of the matter,
we do not find any merit in the appeal.
appeal fails and is, accordingly dismissed.
shall be no order as to costs".
that case, the Court presumably as in the case of Mandar Madhav Tambe's case
(supra), was concerned with the terms and conditions of the contract of
insurance. Before the Court, no occasion arose to consider the general terms
and condition of the contract of insurance vis-`-vis liability of insurance
under the Motor Vehicles Act.
therefore, evident from the discussions made hereinbefore that the liability of
the insurance company to satisfy the decree at the first instance and to
recover the awarded amount from the owner or driver thereof has been holding
the field for a long time.
from the reasons stated hereinbefore the doctrine of stare decisis persuades us
not to deviate from the said principle.
well-settled rule of law and should not ordinarily be deviated Commissioner of
Income-Tax, Bombay North  2 SCR 908 at 921- 3 SCR 316 at 323, 327, 334,
M/s. Gannon Dunkerley and Co. and Others Karanataka 1993 Supp (1) SCC 96, Hanumantappa
Krishnappa Mantur and We may, however, hasten to add that the Tribunal and the
court must, however, exercise their jurisdiction to issue such a direction upon
consideration of the facts and circumstances of each case and in the event such
a direction has been issued despite arriving at a finding of fact to the effect
that the insurer has been able to establish that the insured has committed a
breach of contract of insurance as envisaged under sub-clause (ii) of clause
(a) of sub-section (2) of Section 149 of the Act, the insurance company shall
be entitled to realise the awarded amount from the owner or driver of the
vehicle, as the case may be, in execution of the same award having regard to
the provisions of Sections 165 and 168 of the Act .
in the event, having regard to the limited scope of inquiry in the proceedings
before the Tribunal it had not been able to do so, the insurance company may
initiate a separate action therefor against the owner or the driver of the
vehicle or both, as the case may be. Those exceptional cases may arise when the
evidence becomes available to or comes to the notice of the insurer at a
subsequent stage or for one reason or the other, the insurer was not given
opportunity to defend at all. Such a course of action may also be resorted when
a fraud or collusion between the victim and the owner of the vehicle is
detected or comes to the knowledge of the insurer at a later stage.
as noticed hereinbefore, there are certain special leave petitions wherein the
persons having the vehicles at the time when the accidents took place did not
hold any licence at all, in the facts and circumstances of the case, we do not
intend to set aside the said awards.
awards may also be satisfied by the petitioners herein subject to their right
to recover the same from the owners of the vehicles in the manner laid down
therein. But this order may not be considered as a precedent.
in most of the case, we have not issued notices in view of the fact that the
question of law has to be determined; we have heard counsel for the parties at
length at this stage.
summary of our findings to the various issues as raised in these petitions are
Chapter XI of the Motor Vehicles Act, 1988 providing compulsory insurance of
vehicles against third party risks is a social welfare legislation to extend
relief by compensation to victims of accidents caused by use of motor vehicles.
The provisions of compulsory insurance coverage of all vehicles are with this
paramount object and the provisions of the Act have to be so interpreted as to
effectuate the said object.
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.
The breach of policy condition e.g., disqualification of driver or invalid
driving licence of the driver, as contained in sub-section (2)(a)(ii) of
section 149, have to be proved to have been committed by the insured for
avoiding liability by the insurer. Mere absence, fake or invalid driving licence
or disqualification of the driver for driving at the relevant time, are not in
themselves defences available to the insurer against either the insured or the
third parties. To avoid its liability towards insured, the insurer has to prove
that the insured was guilty of negligence and failed to exercise reasonable
care in the matter of fulfilling the condition of the policy regarding use of
vehicles by duly licensed driver or one who was not disqualified to drive at
the relevant time.
The insurance companies are, however, with a view to avoid their liability must
not only establish the available defence(s) raised in the said proceedings but
must also establish 'breach' on the part of the owner of the vehicle; the
burden of proof wherefor would be on them.
The court cannot lay down any criteria as to how said burden would be
discharged, inasmuch as the same would depend upon the facts and circumstance
of each case.
Even where the insurer is able to prove breach on the part of the insured
concerning the policy condition regarding holding of a valid licence by the
driver or his qualification to drive during the relevant period, the insurer
would not be allowed to avoid its liability towards insured unless the said
breach or breaches on the condition of driving licence is/ are so fundamental
as are found to have contributed to the cause of the accident. The Tribunals in
interpreting the policy conditions would apply "the rule of main
purpose" and the concept of "fundamental breach" to allow defences
available to the insured under section 149(2) of the Act.
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.
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.
The claims tribunal constituted under Section 165 read with Section 168 is
empowered to adjudicate all claims in respect of the accidents involving death
or of bodily injury or damage to property of third party arising in use of
motor vehicle. The said power of the tribunal is not restricted to decide the
claims inter se between claimant or claimants on one side and insured, insurer
and driver on the other. In the course of adjudicating the claim for
compensation and to decide the availability of defence or defences to the
insurer, the Tribunal has necessarily the power and jurisdiction to decide
disputes inter se between insurer and the insured. The decision rendered on the
claims and disputes inter se between the insurer and insured in the course of
adjudication of claim for compensation by the claimants and the award made
thereon is enforceable and executable in the same manner as provided in Section
174 of the Act for enforcement and execution of the award in favour of the
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.
determination of claim by the Tribunal will be enforceable and the money found
due to the insurer from the insured will be recoverable on a certificate issued
by the tribunal to the Collector in the same manner under Section 174 of the
Act as arrears of land revenue. The certificate will be issued for the recovery
as arrears of land revenue only if, as required by sub-section (3) of Section
168 of the Act the insured fails to deposit the amount awarded in favour of the
insurer within thirty days from the date of announcement of the award by the
The provisions contained in sub-section (4) with proviso thereunder and
sub-section (5) which are intended to cover specified contingencies mentioned
therein to enable the insurer to recover amount paid under the contract of
insurance on behalf of the insured can be taken recourse of by the Tribunal and
be extended to claims and defences of insurer against insured by relegating
them to the remedy before regular court in cases where on given facts and
circumstances adjudication of their claims inter se might delay the
adjudication of the claims of the victims.
the reasons aforementioned, these petitions are dismissed but without any order
as to costs.