Insurance Co. Ltd. Vs. Santro Devi & Ors.  INSC 2068 (2 December
IN THE SUPREME COURT
OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 7009 OF 2008 (Arising
out of SLP (C) No.4301 of 2006) United India Insurance Co. Ltd. ... Appellant
Versus Santro Devi & Ors. ... Respondents
S.B. Sinha, J.
Atma Ram Sharma was the owner of a truck bearing registration No.HIN-4737. It
was hypothecated to a Bank. Atma Ram Sharma died sometime in 1991. The said vehicle
was insured with the appellant.
Renewal of the
contract of insurance, however, used to be done by the Bank. Despite the death
of the said Atma Ram Sharma, no step was taken 2 either by the Bank or by his
heirs and legal representatives to get the registration of the vehicle
transferred in their names. The insurance policy also continued to be renewed
in the name of Atma Ram Sharma.
said vehicle met with an accident while being driven by Shri Chhater Singh on
15.9.1994 in which he died. The legal heirs and representatives of the said
Chhater Singh filed an application for grant of compensation under Section 4 of
the Workmen's Compensation Act, 1923 against the widow of the deceased Atma Ram
Sharma as also the appellant- Insurance Company claiming a sum of
having been given notice by the Commissioner of Workmen Compensation, in its
reply, raised the following purported primary objections :
That the para No.1 of
the petiion as stated is wrong hence denied. In fact Shri Atma Ram died in the
year 1991 and on the date of alleged accident no legal insurance policy was in
force. It is pertinent to say that alleged offending vehicle No.HIN-4737 was
fraudulently got insured vide policy No.111302/31/16/21/0065/94 on 12.5.1994 by
concealing the true facts. Even according to law the contract cannot be made in
favour of dead person. So under the Indian Contract Act, 1872 the alleged
contract of Insurance is not liable to pay any amount of compensation. The
respondent No.1 was not insured, so as per the terms and 3 conditions of the
insurance policy, the company is not bound to indemnify the claim."
Commissioner, Workmen's Compensation, having regard to the pleadings of the
parties, framed several issues, issue No.5 whereof reads as under :
"5. Whether the
contract of insurance of the truck in question between Atma Ram & Co. is
void and not enforceable as alleged. ...
the order of the Commissioner, Workmen Compensation, it does not appear that
any witness was examined on behalf of the appellant.
Commissioner, Workmen Compensation, determined issue No.5 in favour of the
respondent, stating :
contract of insurance of the truck in question between Atma Ram and Co. is
void? RW1 Rati Ram has deposed in his statement that Shri Atam Ram was the
owner of the truck and after his death his wife is owner of the said truck.
He is general power
of attorney of Gumani Devi.
He further deposed
that the truck was insured with United India Insurance Company and copy of
Insurance Cover is Ex.RW1/8. The driver of ill- fated truck was Chattar Singh
who died in truck accident near Ronhat in year 1994 who was given Rs.2000/- per
day (sic). In cross-examination he admitted that Atma Ram died in 1991 and the
4 truck was insured with SBI Kafetta. He denied that Chattar Singh was
gratuitous passenger in the ill fated truck. Since the truck was insured with
the respondent No.2, therefore, it is the liability of the Insurance Co. to pay
the amount of compensation. Therefore, this issue is decided in favour of the
petitioners and against the respondents."
sum of Rs.1,42,465/- was directed to be paid by way of compensation. An appeal
preferred thereagainst by the appellant herein under Section 30 of the Workmen
Compensation Act has been dismissed by the High Court relying on or on the
basis of the decision of this Court in Rikhi Ram & Anr. v. Sukhrania (Smt.)
& Ors. [(2003) 3 SCC 97], stating :
"It is thus
clear that whether intimation is given or not given to the Insurance Company
with regard to the transfer of a vehicle. The Insurance Company under the
provisions of the Motor Vehicles Act, 1988 is liable to pay compensation. The
Insurance Company at the time when it renewed the policy of insurance and
accepted the premium should have verified whether Atma Ram was alive or not.
In the present case
the premium appears to have been paid by the bank with which the vehicle was
Vishnu Mehra, learned counsel appearing on behalf of the appellant, would submit
that the contract of insurance having been entered into on or about 13.5.1994
in the name of the deceased Atma Ram Sharma, 5 it was void ab initio and in
that view of the matter, the appellant had no statutory or contractual
liability to reimburse the owner of the vehicle in relation thereto.
Attri, learned counsel appearing on behalf of the respondent, on the other
hand, would contend that a certificate of insurance having been issued by the
Insurance Company, it could not have repudiated the claim having already
accepted the amount of premium.
Motor Vehicles Act, 1988 was enacted to consolidate and amend the law relating
to motor vehicles. Chapter XI of the Motor Vehicles Act provides for insurance
of motor vehicles against third party risks.
Section 145 is the
definition section, clause (b) whereof defines `certificate of insurance' to
mean a certificate issued by an authorized insurer in pursuance of sub-section
(3) of Section 147 and includes a cover note complying with such requirements as
may be prescribed, and where more than one certificate has been issued in
connection with a policy, or where a copy of a certificate has been issued, all
those certificates or that copy, as the case may be. Clause (d) of Section 145
defines `policy of insurance' which include a certificate of insurance.
Section 146 mandates
that no person, except as a passenger, shall use or cause or allow any other
person to use, a motor vehicle in a public place, unless there is in force in
relation to the use of the vehicle by that person or that other person, as the
case may be, a policy of insurance complying with the requirements of the said
Chapter. Section 147 provides for the requirements of policies and limits of
liability in the following terms :
"(a) is issued
by a person who is an authorised insurer; or (b) insurer the person or classes
of persons specified in the policy to the extent specified in sub- section (2)-
(i) against any liability which may be incurred by him in respect of the death
of or bodily injury to any person, including owner of the goods or his
authorised representative carried in the vehicle] or damage to any property of
a third party caused by or arising out of the use of the vehicle in a public
(ii) against the
death of or bodily injury to any passenger of a public service vehicle caused
by or arising out of the use of the vehicle in a public place."
The proviso appended
thereto reads as under :
"Provided that a
policy shall not be required- (i) to cover liability in respect of the death,
arising out of and in the course of his employment, of the 7 employee of a
person insured by the policy or in respect of bodily injury sustained by such
an employee arising out of and in the course of his employment other than a
liability arising under the Workmen's Compensation Act, 1923 (8 of 1923) in
respect of the death of, or bodily injury to, any such employee- (a) engaged in
driving the vehicle, or (b) if it is a public service vehicle engaged as
conductor of the vehicle or in examining tickets on the vehicle, or (c) if it
is a goods carriage, being carried in the vehicle, or (ii) to cover any
insurer could deny its liability on limited grounds as envisaged under
sub-section (2) of Section 149 of the Act. One of the grounds which is
available to the insurance company for denying its statutory liability is that
the policy is void having been obtained by reason of non-disclosure of a
material fact or by a representation of fact which was false in some material
apart from raising a general and vague plea of fraud, no particulars thereof
had been disclosed. The contract of insurance was entered into by the Bank with
the appellant. The premium was paid by the bank. The contract of insurance might
have been drawn in the name of the deceased Atma Ram Sharma but no witness has
been examined on behalf of the appellant alleging that they were not aware
questioned, Mr. Mehra, very fairly stated that the insurance policy was an old
one and it was being renewed from year to year. If the appellant had been
renewing the insurance policy on year to year basis on receipt of a heavy
amount of premium with the knowledge that the owner of the vehicle has expired
and the name of his legal heirs and representatives had not been transferred in
the registration book maintained by the aurhorities under the Motor Vehicles
Act, in our opinion, the appellant cannot be heard to say that it was not bound
to satisfy the claim of a third party.
provisions of compulsory insurance have been framed to advance a social object.
It is in a way part of the social justice doctrine. When a certificate of
insurance is issued, in law, the insurance company is bound to reimburse the
owner. There cannot be any doubt whatsoever that a contract of insurance must
fulfill the statutory requirements of formation of a valid contract but in case
of a third party risk, the question has to be considered from a different
146 provides for statutory insurance. An insurance is mandatorily required to
be obtained by the person in charge of or in possession of the vehicle. There
is no provision in the Motor Vehicles Act that unless the name(s) of the heirs
of the owner of a vehicle is/are substituted on the certificate of insurance or
in the certificate of registration in place of the original owner (since
deceased), the motor vehicle cannot be allowed to be used in a public place.
Thus, in a case where the owner of a motor vehicle has expired, although there
does not exist any statutory interdict for the person in possession of the
vehicle to ply the same on road;
but there being a
statutory injunction that the same cannot be plied unless a policy of insurance
is obtained, we are of the opinion that the contract of insurance would be
enforceable. It would be so in a case of this nature as for the purpose of
renewal of insurance policy only the premium is to be paid. It is not in
dispute that quantum of premium paid for renewal of the policy is in terms of
the provisions of the Insurance Act, 1938.
vehicle was hypothecated to a nationalized bank. The certificate of
registration, presumably, therefore, carried the name of the bank also.
The bank admittedly
paid the premium.
therefore, fail to see any reason as to how the appellant could avoid its
statutory liability. Our attention has been drawn to Section 155 of 10 the
Motor Vehicles Act by Mr. Mehra to contend that the statutory liability of the
insurance company arises only when the original contract of insurance was
entered into by and between the owner and the insurer and not in a case of this
155 of the Act, in our opinion, cannot be said to have any application in a
situation of this nature. We may notice the provisions of Section 157 of the
Act in terms whereof in a case of transfer of a motor vehicle, the certificate
of insurance and the policy shall be deemed to have been transferred in favour
of the person to whom the motor vehicle is transferred with effect from the
date of its transfer.
have noticed hereinbefore that no witness was examined on behalf of the
appellant. Only a competent officer informed in the matter could have disclosed
as to whether the widow of late Atma Ram Sharma had signed any document or
whether the fact that Atma Ram Sharma had expired in the year 1991 came to be
known to the officers of the appellant only after the accident had taken place.
If despite knowledge of the fact that Atma Ram Sharma had died in the year
1991, the insurance company, with its eyes wide open, had been accepting the
amount of premium every year from the widow of the said late Atma Ram Sharma or
from the Bank, in our opinion, a contract by necessary implication, had come
into being. Even in 11 a case of this nature, the doctrine of `acceptance sub
silentio' shall be applicable.
Court furthermore in some of its decisions noticed the distinction between a
statutory contract of insurance and a contract of insurance simplicitor. It is
in that view of the matter, this Court in Rikhi Ram (supra), held :
"4. A perusal of
Sections 94 and 95 would further show that the said provisions do not make
compulsory insurance to the vehicle or to the owners. Thus, it is manifest that
compulsory insurance is for the benefit of third parties. The scheme of the Act
shows that an insurance policy can cover three kinds of risks i.e. owner of the
vehicle, property (vehicle) and third party. The liability of the owner to have
compulsory insurance is only in regard to the third party and not to the property.
Section 95(5) of the Act runs as follows:
"95. (5) Not withstanding
anything elsewhere contained in any law, a person issuing a policy of insurance
under this section shall be liable to indemnify the person or classes of person
specified in the policy in respect of any liability which the policy purports
to cover in the case of that person or those classes of person."
5. The aforesaid
provision shows that it was intended to cover two legal objectives. Firstly,
that no one who was not a party to a contract would bring an action on a
contract; and secondly, that a person who has no interest in the subject-matter
of 12 an insurance can claim the benefit of an insurance.
Thus, once the
vehicle is insured, the owner as well as any other person can use the vehicle
with the consent of the owner. Section 94 does not provide that any person who
will use the vehicle shall insure the vehicle in respect of his separate
may, furthermore, notice that recently this Court in National Insurance Co.
Ltd. v. Laxmi Narain Dhut [(2007) 3 SCC 700] held as under :
"17. Section 149
is part of Chapter XI which is titled "Insurance of Motor Vehicles against
Third- Party Risks". A significant factor which needs to be noticed is
that there is no contractual relation between the insurance company and the
third party. The liabilities and the obligations relatable to third parties are
created only by fiction of Sections 147 and 149 of the Act.
23. As noted above,
there is no contractual relation between the third party and the insurer.
Because of the statutory intervention in terms of Section 149, the same becomes
operative in essence and Section 149 provides complete insulation.
24. In the background
of the statutory provisions, one thing is crystal clear i.e. the statute is
beneficial one qua the third party. But that benefit cannot be extended to the
owner of the offending vehicle. The logic of fake licence has to be considered
differently in respect of the third party and in respect of own damage
Yet again, another
Bench of this Court in Oriental Insurance Company Ltd. v. Meena Variyal &
Ors. [(2007) 5 SCC 428], opined :
"12. Chapter XI
of the Act bears a heading, "Insurance of Motor Vehicles against
third-party risks". The definition of "third party" is an
inclusive one since Section 145(g) only indicates that "third party"
includes the Government. It is Section 146 that makes it obligatory for an
insurance to be taken out before a motor vehicle could be used on the road. The
heading of that section itself is "Necessity for insurance against
third-party risk". No doubt, the marginal heading may not be conclusive.
It is Section 147 that sets out the requirement of policies and limits of
liability. It is provided therein that in order to comply with the requirements
of Chapter XI of the Act, a policy of insurance must be a policy which is
issued by an authorised insurer; or which insures the person or classes of
persons specified in the policy to the extent specified in sub-section (2)
against any liability which may be incurred by the owner in respect of the
death of or bodily injury or damage to any property of a third party caused by
or arising out of the use of the vehicle in a public place. With effect from
14-11-1994, injury to the owner of goods or his authorised representative
carried in the vehicle was also added. The policy had to cover death of or
bodily injury to any passenger of a public service vehicle caused by or arising
out of the use of the vehicle in a public place. Then, as per the proviso, the
policy shall not be required to cover liability in respect of the death,
arising out of and in the course of his employment, of the employee of a person
insured by the policy or in respect of bodily injury sustained by such an
employee arising out of and in the course of his employment, other than a 14
liability arising under the Workmen's Compensation Act, 1923 in respect of the
death of, or bodily injury to, an employee engaged in driving the vehicle, or
who is a conductor, if it is a public service vehicle or an employee being
carried in a goods vehicle or to cover any contractual liability. Sub-section
(2) only sets down the limits of the policy.
13. As we understand
Section 147(1) of the Act, an insurance policy there under need not cover the
liability in respect of death or injury arising out of and in the course of the
employment of an employee of the person insured by the policy, unless it be a
liability arising under the Workmen's Compensation Act, 1923 in respect of a
driver, also the conductor, in the case of a public service vehicle, and the
one carried in the vehicle as owner of the goods or his representative, if it
is a goods vehicle. It is provided that the policy also shall not be required
to cover any contractual liability. Uninfluenced by authorities, we find no
difficulty in understanding this provision as one providing that the policy
must insure an owner against any liability to a third party caused by or
arising out of the use of the vehicle in a public place, and against death or
bodily injury to any passenger of a public service vehicle caused by or arising
out of the use of vehicle in a public place.
The proviso clarifies
that the policy shall not be required to cover an employee of the insured in
respect of bodily injury or death arising out of and in the course of his
employment. Then, an exception is provided to the last foregoing to the effect
that the policy must cover a liability arising under the Workmen's Compensation
Act, 1923 in respect of the death or bodily injury to an employee who is
engaged in driving the vehicle or who serves as a conductor in a public service
vehicle or an employee who travels in the vehicle of the employer carrying
goods if it is a goods 15 carriage. Section 149(1), which casts an obligation
on an insurer to satisfy an award, also speaks only of award in respect of such
liability as is required to be covered by a policy under clause (b) of sub-
section (1) of Section 147 (being a liability covered by the terms of the
policy). This provision cannot therefore be used to enlarge the liability if it
does not exist in terms of Section 147 of the Act.
14. The object of the
insistence on insurance under Chapter XI of the Act thus seems to be to
compulsorily cover the liability relating to their person or properties of
third parties and in respect of employees of the insured employer, the
liability that may arise under the Workmen's Compensation Act, 1923 in respect
of the driver, the conductor and the one carried in a goods vehicle carrying
are not oblivious of a decision of this Court in Deddappa & Ors. V. Branch
Manager, National Insurance Co. Ltd. [(2008) 2 SCC 595], wherein this Court,
having regard to the fact situation obtaining therein, opined :
"20. A contract
is based on reciprocal promise.
by the parties are condition precedents for a valid contract. A contract
furthermore must be for consideration."
In this case, the
statute itself takes care of validity of the contract. It is mandatory. Once a
valid contract is entered into, only because of a mistake or otherwise, the
name of the original owner has not been 16 mentioned in the certificate of
registration and/or the documents of hypothecation of the vehicle with the bank
had still been continuing in his name, it cannot be said that the contract
itself is void unless it was shown that in obtaining the said contract a fraud
had been practised. Not only the particulars of fraud had not been pleaded, but
even no witness was examined on behalf of the appellant. It cannot, thus, be
said that a case of fraud in the matter of entering into the contract of
insurance had been made out by the appellant.
the reasons aforementioned, there is no infirmity in the impugned judgment. The
appeal is dismissed accordingly with costs. Counsel's fee assessed at