Company Limited Vs. Meghji Naran Soratiya & Ors.  INSC 427 (26
Reportable IN THE
SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 1171 OF
2002 NATIONAL INSURANCE COMPANY LTD. ....... Appellant(s) MEGHJI NARAN SORATIYA
& ORS. ....... Respondent(s) WITH CIVIL APPEAL NO. 1172/2002
O R D E R R.
V. Raveendran, J.
insurer has challenged the dismissal of its appeals (against the awards of
Motor Accident Claims Tribunal), by the Gujarat High Court on the sole ground
that the Tribunal while granting permission to the insurer to contest the claim
under Section 170 of the Motor Vehicles Act, 1988 (`Act' for short) did not
assign reasons for granting permission.
XII of the Act relates to Claims Tribunals.
Chapter XI relates to
insurance of motor vehicles against third party risks. The scheme, in
particular, the provisions of section 170 read with section 149, contemplate
the claimants in a motor accident claim filing the claim petition against the
driver and owner of the motor vehicle. The claimants are required to furnish
the particulars relating to insurance and the name and address of the insurer,
but are not required to implead the insurer as a party to the proceedings.
Having regard to the statutory obligation imposed on the insurer to satisfy
judgments and awards against persons insured in respect of third party risks,
the tribunal is required to issue notice to the insurer about the initiation of
the claim proceedings. When such notice is given, the insurer can seek
impleadment only for the limited purpose of defending the action on the grounds
mentioned in sub-section (2) of section 149, that is, breach of a specified
condition of the policy by the insured (owner of the vehicle) or
voidness/invalidity of the policy by reason of the policy having been obtained
by non-disclosure of material facts or by representation of any fact which was
false in some 3 material particular. An insurer is not entitled to contest the
claim on merits when it received such notice under section 149(2).
section 170 of the Act requires the Tribunal to implead the insurer as a party
to contest the claim in the following two circumstances, where it is satisfied
that : (a) there is collusion between the persons making the claim and the
person against whom the claim is made; or (b) the person against whom claim is
made, failed to contest the claim. The Tribunal is required to record the
reasons in writing while directing the insurer who may be liable in respect of
such claim to be impleaded as a party to the proceedings. On being so impleaded
in pursuance of an order under section 170 of the Act, the insurer, without
prejudice to the provisions contained in sub-section (2) of section 149, has
the right to contest the claim on all or any of the grounds that are available
to the person against whom the claim has been made.
the insurer has two distinct and compartmentalised rights, while defending
First is where it
wants to repudiate or deny liability as insurer, either on the ground that
there is a breach of a 4 specified condition of the policy or on the ground
that the policy itself is void. Participation under section 149(2) is only to
repudiate or deny its liability under the insurance policy. Neither the issue
of liability of the driver/owner nor the issue of quantum of compensation can
be the subject matter of contest by the insurer who is served a notice under
section 149(2). Second is where the insurer is impleaded as a respondent with
the right to contest the claim even on merits, either on account of the
Tribunal being satisfied that there is collusion between the claimants and the
owner/driver, or on account of the owner/driver who have been impleaded as
respondents, failing to contest the proceedings. When the insurer is impleaded
and permitted to contest under section 170 of the Act, it can contest either
the quantum of compensation claimed or even the liability of the driver/owner
to pay compensation. This is in addition to, and without prejudice to its
statutory right under section 149(2) to repudiate or deny its liability.
170 therefore proceeds on the assumption that the insurer will not be a party
to the claim proceedings and requires for the Tribunal to implead it as a party
to contest the claim on merits in the two circumstances mentioned therein, namely
(a) collusion between claimants and driver/owner; and (b) non-contest by
Where the insurer is
not a party, and it becomes necessary to implead the insurer as a
party-respondent under section 170 of the Act, with right to contest the claim
on merits, either on the application of the insurer or suo moto, the Tribunal
has to make a brief order recording reasons showing that either of the two
conditions mentioned in the section are satisfied for impleading the insurer as
in practice, virtually in all claim petitions, the insurer is impleaded as a
party respondent alongwith the driver and owner. Consequently, many Tribunals
instead of issuing the special notice under section 149(2) notifying the
insurer of the lodging of a claim against the insured (so as to give the
insurer an option to deny the validity of the policy or repudiate its liability
under the policy under any of the grounds mentioned in section 149(2) of the
Act), issues regular notice to the insurer. As a result, in practice the
insurers file their reply in all claim petitions. They raise the grounds
available under section 149(2), if such grounds exist. Otherwise they generally
traverse the averments in the claim statement, though not permitted to contest
on merits. But where one of the two 6 circumstances mentioned in section 170
exists, that is collusion or non-contest on the part of driver/owner, then the
insurer who is already a party, files an application under section 170 of the
Act seeking permission to contest, which is routinely granted. Where the
insurer is already a party respondent in the claim petition and it makes an
application seeking permission to contest the claim on merits on the ground
that the driver and owner have failed to contest the claim, even a one-line
order or non-reasoned order may be sufficient as the Tribunal can satisfy
itself about the need to grant the permission by a perusal of the record,
without anything more. But where the driver/owner are defending the claim, but
the insurer seeks permission on the ground that there is collusion between the
claimants and the driver/owner, it may be necessary for the tribunal to record
reasons to show that it is satisfied that there is collusion, before granting
permission. Where applications under section 170 of the Act filed by the
insurer specifically alleged that the driver/owner failed to contest the claim
and therefore it was seeking permission, the same is verifiable from the
record. On such verification, the Tribunal may pass a separate order or even
endorse the order "granted" on the application itself.
Even if any reason
was to be recorded, all that the 7 Tribunal is required to say is :
"Permission is granted as driver/owner have failed to contest the
claim". In such cases, failure to record reasons can not render the order
invalid or illegal as the record on the face of it would show the claim was not
being defended by the driver/owner.
requirements should not be stretched to absurd levels to defeat the ends of
is a prevalent view that a rethink on sections 149 and 170 of the Act is
necessary. As noticed above, Sections 149 contemplates claim petitions being
filed only against the driver and the owner, and the driver/owner alone
contesting the claim on merits. The insurer is required to satisfy the award
made by the Tribunal, even if it is not impleaded as a party to the claim
But in practice, the
insurer is invariably made a party to the claim proceedings, presumably to
avoid any kind of delay. It is also a reality that drivers who are primarily
liable seldom contest the proceedings either because of their financial
incapacity or because they know that the burden will be borne vicariously by
the owner and by the insurer under the policy of insurance. It is also a
reality that many of the owners do not appear and contest the claim 8
proceeding, or even if they appear and file a reply, do not defend the claim by
effectively cross-examining the claimant's witnesses and by leading defence evidence.
Owners are complacent
as they have an insurance cover and know that the insurer will bear the
liability. In practice therefore the insurer has to keep on goading the owner
to contest the matter and place necessary evidence. Section 170 provides that
if the driver/owner fail to contest the claim, the Tribunal may permit the
insurer to contest the claim. But what, if the driver/owner file a reply but
fail to effectively participate in the proceedings? What if the counsel for
driver/owner are present but resort to only cursory cross-examination? What if
the driver/owner do not at all lead defence evidence? What if there is a well-
planned collusion that does not meet the eye? Where the insurer does not get
permission under section 170, there is a reasonable chance of the defence to
the claim being far from satisfactory. Judicial notice can also be taken of the
fact that there have been several false claims by claimants in collusion with
the owners/drivers of vehicle and/or Police and/or doctors. The question raised
is whether it is proper to prohibit the insurer, which is to bear the liability
statutorily and contractually, from participating in the process of
adjudication of liability and assessment 9 of compensation? Or the statute
having made the insurer directly liable to the claimants, should the insurer be
given a direct right to contest the claim on merits without the technical
requirement of permission? Should the insurer always be at the mercy of the
owner to contest the claim ? These are matters that invite serious
consideration, particularly by the Parliament and Law Commission and other
stake-holders. Be that as it may.
to these cases, we are satisfied that the grant of permission by the Tribunal
to the insurer to contest the proceedings does not call for interference. In
the first case, both the driver and owner, though served, remained absent and
did not contest the claim. In the second case, the driver was deleted from the
array of parties as he could not be served and the owner entered appearance,
but did not file statement of objections or contest the claim.
specifically alleged in the applications under section 170 that the
driver/owner failed to contest the claim and therefore it was seeking
assuming that order granting permission required recording of reasons, if the
order failed to record reasons 10 on being challenged, the High Court could
either set aside the permission granted, with a direction to the Tribunal to
reconsider the applications and pass a reasoned order, or in special
circumstances, itself consider whether the case warranted the grant of
permission and decide the question.
But under no
circumstances, the Tribunal's permission to contest the claim, can be equated
to or treated as denial of permission to contest the claim, merely on the
ground that reasons were not recorded. Further, where the order granting the
permission to contest is not challenged at all, the High Court can not dismiss
the appeal filed by the insurer on merits, on the ground that Tribunal did not
assign reasons while granting permission under Section 170 of the Act.
Consequently, the orders of the High Court dismissing the appeals only on the
ground that the Tribunal did not record reasons for granting permission, are
liable to be set aside.
regard to the fact that the two appeals relate to accidents which took place in
the years 1991 and 1996 and the appeals have been pending in this Court for
nearly seven years, we propose to consider and dispose of the appeals on
merits, instead of relegating the parties to one more round of litigation
before the High Court.
Civil Appeal No.
claim related to the death of a mason aged 58 years in a motor accident which
occurred in the year 1991.
His son and
daughter-in-law were the claimants and claimed a compensation of Rs. 3 lakhs.
The Tribunal after considering the evidence, held that the deceased was aged 55
to 58 years, that his income was Rs. 2,250/- per month and that he was contributing
Rs.1500/- per month to the family. It however restricted the annual loss of
dependency to Rs.15,000/- instead of Rs.18000/- and by applying a multiplier of
10, arrived at the loss of dependency as Rs. 1,50,000/-. It awarded Rs.
15,000/- towards loss of estate, Rs. 5,000/- for funeral expenses, Rs.5,000/-
towards medicines/treatment (as the deceased underwent treatment for a short
period in a hospital before death). Thus it determined the compensation payable
as Rs. 1,75,000/- and awarded the same with interest @ 15% per annum from the
date of petition.
12. The learned
counsel for the appellant submitted that when there was no clear and conclusive
evidence that the married son and daughter-in-law were dependent on the 12
deceased, the Tribunal erred in restricting the deduction towards the
living/personal expenses of the deceased to only one-third. He also submitted
that award of Rs. 15,000/- towards loss of estate was excessive. There is some
merit in the said contentions. We will therefore reassess the compensation. The
Tribunal found that the income of the deceased was Rs. 2,250/- per month or
Rs.27,000/- per annum. There is no serious challenge to this finding. On the
facts and circumstances of the case, 50% should have been deducted towards the
personal and living expenses of the deceased and not one-third. Thus, the
contribution to the family (or the saving by the deceased even assuming that
the claimants were fully dependant) would have been Rs. 13,500/- per annum.
There is nothing wrong in the multiplier applied (that is 10) as it is in
consonance with the principles laid down in General Manager, Kerala State Road
Transport Corpn. v. Susamma Thomas [1994 (2) SCC 176] and U.P. State Road
Transport Corpn. v. Trilok Chandra [1996 (4) SCC 362]. Therefore, the total
loss of dependency would be Rs. 1,35,000/-. By adding Rs.5,000/- each under the
heads of loss of estate, funeral expenses and cost of treatment, the total
compensation is determined as Rs. 1,50,000/-.
find that the award of interest at 15% per annum was excessive. We are of the
view that award of interest at 9% per annum would be appropriate, just and
therefore, allow the appeal, set aside the order of the High Court and reduce
the award to Rs. 1,50,000/- with interest at 9% per annum from the date of
petition to date of deposit.
Re : CA No. 1172/2002
claim related to the death of a bus conductor aged 23 years in a motor accident
in 1996. The claimants were his widow aged 22 years, two minor children aged
three years and one year and parents. The claimants stated that the deceased
was earning Rs. 3,000/- per month plus Rs.600/- as bhatta charges; that the
deceased was pursuing his studies for Master's degree, and that he would have
earned Rs. 5,000/- to 6,000/- by securing other employment, after completing
his studies. The Tribunal held that the deceased would have earned at least Rs.
5,000/- per month on completing his studies. After deducting one-third towards
personal and living expenditure of the deceased, it arrived at the contribution
to the family as Rs. 3334/- per 14 month or Rs.48,008/- per annum. It applied
a multiplier of 16 and arrived at the total loss of dependency as Rs. 6,40,128/-.
By adding Rs. 20,000/- towards loss of estate, Rs. 10,000/- towards loss of
consortium and Rs. 2,000/- towards funeral expenses, the Tribunal determined
the total compensation as Rs. 6,72,128/- and awarded the same with interest at
Rs. 15% from the date of petition till the date of deposit.
learned counsel for the insurer submitted that in view of the admissions and
evidence that deceased was getting a salary of Rs. 3,000/- , the Tribunal ought
not to take the income at a figure more than Rs. 3,000/- per month. But having
regard to the fact that the claimants had produced evidence to show that the
deceased had passed B.A. and was studying for securing a M.A. degree, we are of
the view that the Tribunal was justified in assuming a higher income at the
time of death instead of the actual earning at the time of his death. But the
amount assessed as income cannot be a fancy figure. It should be realistic and
should be close to the actual earning (vide Susamma Thomas (supra) and Sarala
Dixit v. Balwant Yadav -- AIR 1996 SC 1274). On the facts and circumstances, we
are of the view that the income should be taken as Rs. 4,000/- per 15 month
(Rs. 48,000/- per annum). Only one-fourth of the income (instead of the
standard one-third) has to be deducted towards personal and living expenses of
the deceased, having regard to his larger family. Thus the contribution to the
family would have been Rs. 36,000/- per annum. By applying a multiplier of 17,
the loss of dependency would be Rs. 6,12,000/-. By adding Rs, 5,000/- each
under the heads of loss of estate, loss of consortium and funeral expenses, the
total compensation would be Rs. 6,27,000/-. As the rate of interest awarded
(15% per annum) is excessive, we reduce it to 9% per annum.
accordingly allowed this appeal, set aside the order of the High Court and
modify the award by reducing it to Rs. 6,27,000/- with interest at 9% per annum
from the date of petition till date of relief. We direct that the compensation
be apportioned in the ratio of 40% to the widow, 20% each to the two minor
children and the mother.
The Tribunal shall
make appropriate consequential directions relating to bank deposits.
[R. V. Raveendran]