New Asiatic Insurance Co. Ltd. Vs.
Pessumal Dhanamal Aswani & Ors [1964] INSC 135 (24 April 1964)
24/04/1964 DAYAL, RAGHUBAR DAYAL, RAGHUBAR
SUBBARAO, K.
GUPTA, K.C. DAS
CITATION: 1964 AIR 1736 1964 SCR (7) 867
CITATOR INFO:
D 1968 SC2110 (2) R 1988 SC1332 (13)
ACT:
Motor Vehicles Act-(4 of 1939), ss. 93 to
96-Scope of.
HEADNOTE:
A had insured his car with the appellant
under a comprehensive policy. A permitted B, (who had insured his own car with
-another company) to drive his car and while B was driving the car it met with
an accident. As a result of the accident died and D sustained serious injuries.
Both C and D were in the car. The heirs of C and D filed suits for damages.
Notices under s. 96(2) of the Motor Vehicles Act, 1939 were issued to the
appellant who thereupon took out a Chamber Summons contending that the notice
was bad in law.
Alternatively it was contended that the
appellant be permitted to defend the suit in the name of the defendant.
The Court held that the notices were bad. The
plaintiffs filed Letters Patent appeals with success and the Chamber Summons
were dismissed and the trial Judge was directed to hear the alternative prayer.
Against this Order the present appeal was filed with special leave.
The contention of the appellant was that in
view of paragraph 4 of B's own policy issued by the other company which
indemnified B against any liability incurred by him whilst personally driving a
private car not belonging to him or hired by him. under a Hire-Purchase
agreement, B was not included among persons indemnified in para. 3 of A's
policy which the appellant had issued on account of proviso (a) to the said
para. The respondent contended that this proviso is not a limitation on the
class of persons indemnified under para. 3 that class being the drivers driving
A's car insured under the policy but merely amounted to a condition affecting the
liability of the company vis a vis the driver who was entitled to be
indemnified under any other policy.
Held: (i) From a consideration of ss. 93, 94,
95 and 96 of the Motor Vehicles Act it follows that if under the terms of the
policy B can be said to be the person insured under Para. 3 ,of the policy, the
company would be liable to satisfy the decree if any passed against B.
(ii)The appellant by agreeing with the person
who effects the policy, to insure him against liability to third parties, takes
upon itself the entire liability of the person effecting the insurance. It is
open to the insurer not to -extend the indemnity to the insured to other
persons but if it extends it to other persons, it cannot restrict it vis a, vis
the right of the third party ,entitled to damages to recover them from the
insured, a right which is not disputed. A proviso meant to exempt certain
persons from the general classification will have to be related to
considerations affecting it and is not to be related to such ,classified
person's right to indemnity from any other insurer.
(iii)The cl. (4) of s. II of B's policy with
the other company does not make that policy to be a policy within the meaning
of L/P(D))1SCI-28(a) 368 s.94 of the Act in relation to A's car by whose user B
incurred liabilities sought to be established in the two suits. Such a policy
and any indemnity under it cannot be used for sub-classifying drivers specified
in the policy issued to A by the appellant.
(iv)The High Court was correct in holding
that the appellant had insured B in view of para. 3 of s. II of that policy and
that it comes within the expression insurer in s. 96 of the Act.
CIVIL APPELLATE JURISDICTION: Civil Appeals
Nos. 1043-1044 of 1963. Appeals by special leave from the judgment and decree
dated April 8, 1963 of the Bombay High Court in Appeals Nos. 10 and 11 of 1962.
S.T. Desai, V. N. Thakar, J. B. Dadachanji,
0. C. Mathur and Ravinder Narain, for the appellant (in both the appeals).
G.S. Pathak, 0. P. Malhotra and 1. N. Shroff,
for respondent No. 1 (in both the appeals).
V.J. Merchant, for respondents Nos. 2 and 4
to 7 (in C.A. No. 1043/1963).
April 24, 1964. The Judgment of the Court was
delivered by RAGHUBAR DAYAL, J.-These appeals, by special leave, arise in the
following circumstances:
S. N. Asnani owned Chevrolet Car bearing
registered No. AA 4431. He insured it with the New Asiatic Insurance Co.
Ltd., hereinafter referred to as the company,
under a policy dated November 26, 1957. Asnani permitted Pessumal Dhanamal
Aswani, hereinafter called Pessumal, to drive that car.
When Pessumal was driving the car with Daooji
Radhamohan Meherotra and Murli Dholandas in the car, the car met with an
accident as a result of which Meherotra died and Murli received injuries.
Pessumal himself owned a Pontiac car which
had been insured with the Indian Trade & General Insurance Co. Ltd., under
policy No. Bombay P.C. 42733-2, dated November 18, 1957.
The heirs of Meherotra instituted suit no.70
of 1959 against Pessumal for the recovery of Rs. 2,50,000/by way of damages
with interest. Murli instituted suit no. 71 of 1959 against Pessumal to recover
Rs. 1,50,000/by way of damages.
Notices under s. 96(2) of the Motor Vehicles
Act, 1939 (Act IV of 1939), hereinafter called the Act, were issued to the New
Asiatic Insurance Co, Ltd. The notice was given to the company as the
defendant's liability to third parties had been. insured with it under its
policy no. MV/4564. The company then took out Chamber Summons and it was
contended that notice under s. 96(2) of the Act was bad in law and should be
set aside and that the company was not liable to satisfy any 869 judgment which
might be passed in the suit against the defendant. Alternatively, it was prayed
that the company be added as a party defendant to the suit and/or be authorised
to defend the suit in the name of the defendant. Tarkunde J., held the notice
issued to the company in the suits under s. 96(2) of , the Act, to be bad in
law and, accordingly, set them aside.
The plaintiffs then filed Letters Patent
Appeals which were allowed and the Chamber Summonses were dismissed. It was
directed that the trial Judge would hear the alternative prayers in the Chamber
Summonses and make the necessary orders, It is against this order in each of
the appeals that the company has preferred these appeals, after obtaining
special leave.
To appreciate the contentions of the parties
in these appeals, reference may be made to certain provisions in the two
policies. The various provisions in the two policies are identical in matters
affecting the question for determination before us. We, therefore, set out the
relevant provisions from the policy issued by the company and would refer to differences,
if any, at the proper place.
The policy is described as 'Private Car
(Comprehensive Policy)'. The policy issued by the other company does not so
describe it, but it is also a Comprehensive Policy as the premium charged is on
that basis. The policy insures, under Section I against loss or damage, under
Section II against liability to third parties and under Section III against
liability for medical expenses. Thereafter, follow the general exceptions and
conditions.
Para 1 of Section II indemnifies the insured,
i.e. Asnani who effected the policy, in the event of accident caused by or
arising out of the use of the motor car, against all sums which he may become
legally liable to pay in respect of death or of bodily injury to any person.
Paras 3 and 4, generally known as 'Other drivers' 'Extension Clause' and 'Other
Vehicles Extension Clause' respectively, are material and are set out in full:
"3. In terms of and subject to the
limitations of the indemnity which is granted by this section to the Insured
the Company will indemnify any driver who is driving the Motor Car on the
Insured's order or with his permission provided that such Driver: (a)is not
entitled to indemnity under any other policy.
(b)shall as though he were the Insured
observe, fulfill and be subject to the terms, exceptions and conditions of the
policy in so far as they can apply.
870
4. In terms of and subject to the limitations
of the indemnity which is granted by this Section in connection with the Motor
Car the Company will indemnity which is granted by this Section in co private
Motor Car (but not a Motor Cycle) not belonging to him and not hired to him
under a Hire Purchase Agreement".
Under the heading 'Avoidance of certain terms
and right of recovery', the policy states:"Nothing in this Policy or any
endorsement hereon shall affect the right of any person indemnified by this
Policy or any other person to recover an amount under or by virtue of the
provisions of the Motor Vehicles Act, 1939, section 96.
But the Insured shall repay to the Company
all sums paid by the Company which the Company would not have been liable to
pay but for the said provisions." Condition 6 reads:
"6. If at the time any claim arises
under this Policy there is any other existing insurance covering the same loss
damage or liability the Company shall not be liable to pay or contribute more
than its rateable proportion of any loss damage compensation costs or expense.
Provided always that nothing in this Condition shall impose on the Company any
liability from which but for this Condition it would have been relieved under
proviso (a) of Section II-3 of this Policy".
The Schedule to the policy mentions the
limitations as to use and under heading 'Driver' notes (a)Any person: (b)The
insured may also drive a motor car not belonging to him and not hired to him
under a Hire Purchase Agreement.
Provided that the person driving holds a
licence to drive the Motor Car or has held and is not disqualified for holding
or obtaining such a licence".
At the end of the Schedule is an important
notice which reads:
"The insured is not indemnified if the
Vehicle is used or driven otherwise than in accordance with this Schedule. Any
payment made by the Company by reason of wider terms appearing in the
Certificate in order to comply with Motor Vehicles Act 1939 is recoverable from
the Insured. See the clause headed 'Avoidance of certain terms and right of
recovery'." 871 The contention for the appellant is that in view of para 4
of Pessumal's policy issued by the other company, Pessumal was indemnified against
any liability incurred by him whilst personally driving a private motor car not
belonging to him and not hired to him under a Hire Purchase Agreement, and
that, therefore, lie was not included among the persons indemnified in para 3
of the policy it had issued to Asnani on account of proviso (a) to para 3 which
reads:
"provided that such driver is not
entitled to indemnity under any other policy".
This contention is met by the respondent on
the ground that this proviso is not a limitation on the class of persons
indemnified under para 3, that class being the drivers driving the Chevrolet
car insured under the policy, but merely amounted to a condition affecting the
liability of the company vis a vis the driver who was entitled to indemnity
under any other policy. The question thus reduces itself to the determination
of whether Pessumal comes within the persons indemnified in para 3 of the
policy issued by the company.
We may now set out the relevant provisions of
the Act which have a bearing on the contention between the parties.
Chapter VIII of the Act provides for
insurance of motor vehicles against third party risks. Section 93 defines the
expressions 'authorised insured', 'certificate of insurance' and reciprocating
country'. The relevant portions of the various sections are:
"94. (1). No person shall use except as
a passenger or cause or allow any other person to use a motor vehicle in a
public place, unless there is in force in relation to the use of the vehicle by
that person or that other person, as the case may be, a policy of insurance
complying with the requirements of this Chapter.
Explanation-A person driving a motor vehicle
merely as a paid employee, while there is in force in relation to the use of
the vehicle no such policy as is required by this subsection, shall not be
deemed to act in contravention of the sub-section unless he knows or has reason
to believe that there is no such policy in force.
(2) Sub-section (1) shall not apply to any
vehicle owned by the Central Government or a State Government and used for
Government purposes unconnected with any commercial enterprise.
(3) The appropriate Government may. by order,
exempt from the operation of subsection (1) any 872 vehicle owned by any of the
following authorities. namely: Provided that no such order shall be made in
relation to any such authority unless a fund has been established and is
maintained by that authority in accordance with the rules made in that behalf
under this Act for meeting any liability arising out of the use of any vehicle
of that authority which that authority or any person in its employment may
incur to third parties.
95. (1) In order to comply with the
requirements of this Chapter, a policy of insurance must be a policy which(a)
is issued by a person who is an authorised insurer or by a co-operative society
allowed under section 108 to transact the business of an insurer, and (b)
insures the person or classes of person specified in the policy to the extent
specified in sub-section (2) against any liability which may be incurred by him
or them in respect of the death of or bodily injury to any person caused by or
arising out of the use of the vehicle in a public place:
(4) A policy shall be of no effect for the
purposes of this Chapter unless and until there is issued by the insurer in
favour of the person by whom the policy is effected a certificate of insurance
in the prescribed form and containing the prescribed particulars of any
conditions subject to which the policy is issued and of any other prescribed matters;
and different forms, particulars and matters
may be prescribed in different cases, (5) Notwithstanding 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.
96. (1). If, after a certificate of insurance
has been issued under subsection (4) of section 95 in favour of the person by
whom a policy has been effected, judgment in respect of any such liability 873
as is required to be covered by a policy under clause (b) of sub-section (1) of
section 95 (being a liability covered by the terms of the policy) is obtained
against any person insured by the policy, then, notwithstanding that the
insurer may be" entitled to avoid or cancel or may have avoided or
cancelled the policy, the insurer shall, subject to the provisions of this
section, pay to the person entitled to the benefit of the decree any sum not
exceeding the sum assured payable there under, 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) No sum shall be payable by an insurer
under sub section (1) in respect of any judgment unless before or after the
commencement of the proceedings in which the judgment is given the insurer had
notice through the Court of the bringing of the proceedings, or in respect of
any judgment so long as execution is stayed thereon pending an appeal; and an
insurer to whom notice of the bringing of any such proceedings is so given
shall be entitled to be made a party thereto and to defend the action on any of
the following grounds, namely (3)Where a certificate of insurance has been
issued under sub-section (4) of section 95 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 conditions other than those in
clause (b) of subsection (2) shall, as respects such liabilities as are
required to be covered by a policy under clause (b) of sub-section (1) of
section 95, be of no effect :
Provided that any sum paid by the insurer in
or towards the discharge of any liability of any person which is covered by the
policy by virtue only of this sub-section shall be recoverable by the insurer
from that person.
(4) If 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 874 the policy in respect of
that liability, the insure shall be entitled to recover the excess from that
person (6)No insurer to whom the notice referred to in subsection (2) or
sub-section (2A) has been given shall be entitled to avoid his liability to any
person en titled to the benefit of any such judgment as is referred to in
sub-section (1) or sub-section (2A) otherwise than in the manner provided for
in sub-section (2), or in the corresponding law of the State of Jammu and
Kashmir or of the reciprocating country, as the case may be".
Chapter VIII of the Act, it appears from the
heading, makes provision for insurance of the vehicle against third party
risks, that is to say, its provisions ensure that third parties who suffer on
account of the user of the motor vehicle would be also to get damages for
injuries suffered and that their ability to get the damages will not be
dependent on the financial condition of the driver of the vehicle whose user
led to the causing of the injuries. The provisions have to be construed in such
a manner as to ensure this object of the enactment.
Section 94 prohibits, as a matter of
necessity, for insurance against third-party risk, the use of a motor vehicle
by any person unless there exists a policy of insurance in relation to the use
of the vehicle by that particular person and the policy of insurance complies
with the requirements of Chapter VIII. The policy must therefore provide
insurance against any liability to third party incurred by that person when
using that vehicle. The policy should therefore be with respect to that
particular vehicle. It may, however, mention the person specifically or
generally by specifying the class to which that person may belong, as it may
not be possible to name specifically all the persons who may have to use the
vehicle with the permission of the person owning the vehicle and effecting the
policy of insurance. The policy of insurance contemplated by S. 94 therefore
must be a policy by which a particular car is insured.
Section 95 lays down the requirements which
are to be complied with by the policy of insurance issued in relation to the
use of a particular vehicle. They are: (1) the policy must specify the person
or classes of person who are insured with respect to their liability to third-parties;
(2) the policy must specify the extent of
liability which must extend to the extent specified in sub-S. (2); and (3) the
liability which be incurred by the specified person or classes of person in
respect of death or bodily injury to any person caused by or arising out of the
use of the vehicle insured in a public place.
875 Sub-section (4) of s. 95 requires the
issue of a certificate of insurance, in the prescribed form, to the person who
effects the, policy. The form of the certificate prescribed by the Motor
Vehicles Third Party Insurance Rules, 1946, requires the specification of
persons or classes of persons entitled to drive.' The authorised insurer is
also to certify in the certificate that the policy to which the certificate
relates, as well as the certificate of insurance, are issued in accordance with
the provisions of Chapter VIII of the Act.
Sub-section (5) of s. 95 makes the insurer
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. If the policy covers the insured for his
liability to third parties, the insurer is bound to indemnify the person or
classes of person specified in the policy The same is the effect of sub-s. (1)
of s. 96 which provides that the insurer is bound to pay to the person entitled
to the benefit of a decree he obtains in respect of any liability covered by
the terms of the policy against any person insured by the policy irrespective
of the fact whether the insurer was entitled to avoid or cancel or might have
avoided or cancelled the policy. This means that once the insurer has issued a
certificate of insurance in accordance with sub-s. (4) of s. 95 he has to satisfy
any decree which a person receiving injuries from the use of the vehicle
insured obtains against any person insured by the policy.
He is however liable to satisfy the decree
only when he has been served with a notice under sub-s. (2) of s. 96 about the
proceedings in which the judgment was delivered. It is for this reason that a
notice under sub-s. (2) of s. 96 was issued to the company and it is on account
of the consequential liability in case the plaintiffs' claim is decreed against
Pessumal that the appellant challenged the correctness of the allegation that
Pessumal was a person insured under the policy issued by it in respect of the
Chevrolet car. It follows from a consideration of these various provisions of
the Act-and this is not really disputed for the appellant-that if under the
terms of the policy Pessumal can be said to be the Person insured under para 3,
the company would be liable to -satisfy the decree if any passed against
Pessumal.
The whole question then is whether Pesumal
comes within the terms of para 3 of Section II of the policy.
Under this paragraph, the company indemnifies
any person who is driving the motor-car on the insured's order or with his
permission. Pessumal was driving the car with the permission of Asnani who had
effected the Policy and therefore the company undertook to indemnify Pessum'al
in accordance with this provision of para 3. The appellant, however.
876 contends that this provision should not
be read as defining by itself the class of persons insured under it, in view of
the further classification of this class of drivers by proviso (a). It is
contended that only such drivers were indemnified as were not entitled to
indemnity under any other policy and thus drivers who were entitled to
indemnity under any other policy were taken out of the general class of drivers
driving the car on the insured's order or with his permission. We do not agree
with this contention.
The proviso is not really a classification of
drivers but is a restriction on the right of the driver to recover any damages
be had to pay, from the company. The driver who can ,get indemnity from any
other company under any other policy is, under this contractual term, not to
get indemnity from the company. The proviso thus, affects the question of
indemnity between a particular driver and the company and has nothing to do
with the liability which the driver has incurred to the third party for the
injuries caused to it and against which liability was provided by s. 94 of the
Act and was affected by the policy issued by the company.
The company, by agreeing with the person who
affects the policy, to insure him against liability to third parties, takes
upon itself the entire liability of the person effecting the insurance. It is
open to the insurer not to extend this idemnity to the insured to other persons
but if it extends it to other persons, it cannot restrict it vis a vis the
right of the third party entitled to damages, to recover them from the insured,
a right which is not disputed. A proviso meant to exempt certain persons from
the general classification Will have to be related to considerations affecting
it and is not to be related to such classified persons right to indemnity from
any other insurer. In this connection reference may be made to proviso (b)
which cannot in any case be a proviso relating to the classification of persons
to be indemnified. It provides that tie person indemnified under para 3 will
observe, fulfil and be subject to the terms, exceptions and conditions of the
policy in so far as they can apply to him.
We are further of opinion that clause (4) of
Section II of Pessumal's policy with the other company does not make that
policy to be a policy within the meaning of s. 94 of the Act in relation to the
Chevrolet car by whose user Pessumal incurred liabilities sought to be
established in the two suits. The paragraph indemnifies the insured, i.e.,
Pessumal, whilst personally driving any private motor car.
It does not indemnify him against the
liability incurred when driving any particular car and therefore, in view of
what we have said earlier, Pessumal's policy cannot be a policy of insurance in
relation to the Chevro. let car as required by s. 94 of the Act. Such a policy
and any indemnity under it cannot be used for sub-classifying drivers specified
in the policy 'of the company.
877 The Act contemplates the possibility of
the policy of insurance undertaking liability to third parties providing such a
contract between the insurer and the insured, that is, the person who effected
the policy, as would make the company entitled to recover the whole or part of
the amount it has paid to the third party from the insured. The insurer thus
acts as security for the third party with respect to its realising damages for
the' injuries suffered.
but vis a vis the insured, the company does
not undertake that liability or undertakes it to a limited extent. It is in
view of such a possibility that various conditions are laid down in the policy.
Such conditions, however, are -effective only between the insured and the
company, and have to be ignored when considering the liability of the company
to third parties. This is mentioned prominently in the policy itself and is
mentioned under the heading 'Avoidance of certain terms and rights of recovery',
as well as in the form of 'An Important Notice' in the Schedule to the policy.
The avoidance clause says that nothing in the policy or any endorsement thereon
shall affect the right of any person indemnified by the policy or any other
person to recover an amount under or by virtue of the provisions of the Act. It
also provides that the insured will repay to the company all sums paid by it
which the company would not have been liable to pay but for the said provisions
of the Act. The 'Important Notice' mentions that any payment made by the
company by reason of wider .terms appearing in the certificate in order to
comply with the Act is recoverable from the insured, and refers to the
avoidance clause.
Thus the contract between the insured and the
company may not provide for all the liabilities which the company has to
undertake vis a vis the third parties, in view of the provisions of the Act. We
are of opinion that once the company had undertaken liability to third parties
incurred by the per sons specified in the policy, the third parties' right to
recover any amount under or by virtue of the provisions of the Act is not
affected by any condition in the policy.
Considering this aspect of the terms of the
policy, it is reasonable to conclude that proviso (a) of para 3 of Section II
is a mere condition affecting the rights of the insured who effected the policy
and the persons to whom the cover of the policy was extended by the company,
and does not come in the way of third parties' claim against the company on
account of its claim against a person specified in para 3 as one to whom cover
of the policy was extended.
It has been contended for the appellant that
it was not incumbent on the owner of a car to take out a policy of insurance
indemnifying himself or any person permitted to drive the car and that if he
does not insure the car and uses it he runs the risk of prosecution under s.
125 of the Act. This is 878 true, but has no relevant effect on the question
for decision before us. Asnani did insure his car with respect to liability
against third persons. We have to see whether the company, on account of
undertaking that liability can be said to have insured Pessumal on account of
his driving the car with the permission of Asnani. The same may be said about
the other contention for the appellant that there is nothing in the Act which
makes it compulsory for an insurer to insist that the owner of the car takes
out a policy in the widest terms possible covering any person who drives the
car with his permission. The company did agree under the policy to indemnify
drivers who drove the car with the insured's permission. The question is
whether that undertaking covers Pessumal.
Lastly, we may mention that the question
about tie proper stage at which the question raised by the company in the
Chamber notice is to be decided, came up for consideration at the hearing. We
however do not propose to express any opinion on that point in this case.
We are of opinion that the High Court rightly
held that the company had insured Pessumal in view of para 3 of Section II of
the policy and that it comes within the expression 'insurer' in s. 96 of the
Act. We therefore dismiss the appeals with costs of hearing one set.
Appeals dismissed.
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