AMRIT PAUL SINGH vs. TATA AIG GENERAL INSURANCE CO. LTD.

1 REPORTABLE  IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 2253 OF 2018 (Arising out of S.L.P. (CIVIL) NO. 7692 of 2017) Amrit Paul Singh & Anr.            Appellant(s) VERSUS TATA AIG General Insurance                          Respondent(s) Co. Ltd. & Ors. J U D G M E N T Dipak Misra, CJI.   The legal representatives of the deceased, Jagir Singh, the husband of the second respondent, preferred a claim petition being MACT Case No. 70 of 2013 under Section 166 of the Motor Vehicles   Act,   1988   (for   brevity,   ‘the   Act’)   before   the   Motor Accident  Claims  Tribunal,  Pathankot  (for  short,  ‘the   tribunal’) claiming compensation to the tune of Rs. 36,00,000/­. The claim petition was filed on the basis that on 19.02.2013, Jagir Singh Signature Not Verified Digitally signed by DEEPAK GUGLANI Date: 2018.05.17 15:43:54 IST Reason: was   travelling   to   Pathankot   on   his   motor   cycle   and   at   that juncture, the offending truck bearing temporary registration No. 2 PB­06­6894 belonging to the appellant No. 2 driven in a rash and negligent manner hit the motor cycle of the deceased as a result of   which   he   sustained   multiple   injuries,   and   eventually, succumbed to the same when being taken to the hospital. The claim put forth was sought to be sustained on many a basis which need not be adverted to.  2. The insurer, the first respondent herein, opposed the claim on the ground that the vehicle in question was driven in violation of the terms of the insurance policy and further the driver was not having a valid and effective driving license and, therefore, it was not obliged to indemnify the insured. That apart, a stand was taken that the vehicle did not have the permit on the date of the accident. On behalf of the owner of the vehicle and driver, assertions were made that the vehicle was insured with the first respondent   as   per   the   insurance   policy,   that   the   vehicle   was registered   and   the   driver   had   the   requisite   driving   licence. Additionally, copy of the route permit of the offending truck was brought on record.  3.   The   tribunal   noted   that   the   vehicle   was   purchased   in September 2012 and insured on 20.12.2012. It was registered on 26.02.2013.   The   accident,   as   stated   earlier,   occurred   on 3 19.02.2013.   The   tribunal,   placing   reliance   on   the   decision rendered   by   this   Court   in   National   Insurance   Co.   Ltd.   v. 1 , held that the insurer was Challa Bharathamma and others not liable and proceeded to quantify the amount of compensation and   determined   the   same   at   Rs.   15,63,120/­.   The   tribunal directed the amount to be paid by the insurer along with interest at the rate of 9% from the date of award till its realisation and recover the same from the owner and driver of the vehicle. A further   direction   was   given   for   attachment   of   the   truck   in question till the award was satisfied. 4. The award dated 20.11.2014 passed by the tribunal was challenged in FAO No. 1702 of 2016   before the High Court of Punjab and Haryana at Chandigarh. It was contended in appeal that the appellant No. 2, the owner of the offending vehicle, had deposited   the   necessary   fees   along   with   application   on 19.02.2013 for issue of route permit and the same was issued on 27.02.2013. It was further urged that when the owner of the vehicle had already submitted the documents in the transport office   for   grant   of   permit   along   with   the   requisite   fees,   the tribunal was in error in holding that the vehicle was being plied 1 (2004) 8 SCC 517 4 without a valid permit. In support of the submissions, reliance was   placed   upon   Ashok   Kumar   Khemaka   v.   Oriental 2 ,   Insurance   Company   Ltd.   and   other National   Insurance 3 Company Limited v. Kamlesh Kaur and others     and   Moti 4 .  Ram v. ICICI Lombard and others 5. The High Court scrutinized Annexure A­1 which was filed to justify the stand that the application for issue of the route permit was made to the competent authority and, on a scrutiny of the same, came to hold that the owner had not been able to establish that he had submitted the application for issue of permit before the accident.   Referring to Section 66 of the Act and placing reliance on  Challa Bharathamma  case, the High Court opined that even assuming that the owner had already applied for grant of the permit before the accident, the same would not entitle the owner to ply the vehicle. It is worthy to note that the learned single Judge distinguished the decisions cited before him and, resultantly, confirmed the award of the tribunal. 2 2014 (3) RCR (Civil) 1018 3 2006 (3) RCR (Civil) 634 4 2015 ACJ 1793 5 6. We have heard Mr. Sudhir Walia, learned counsel for the appellants, and Mr. Amit Kumar Singh, learned counsel for the respondent­insurer. 7. The   conclusions   recorded   by   the   tribunal   and   further confirmed   by   the   High   Court   clearly   show   that   the   accident occurred on 19.02.2013 and the competent authority issued the permit on 27.02.2013.  In this regard, Sections 2(28) and 2(31) of the Act that define “motor vehicle” or “vehicle” and “permit” are reproduced below:­ “ “(28) motor vehicle” or “vehicle” means any mechanically propelled vehicle adapted for use   upon   roads   whether   the   power   of propulsion  is  transmitted  thereto  from  an external or internal source and includes a chassis   to   which   a   body   has   not   been attached and a trailer; but does not include a   vehicle   running   upon   fixed   rails   or   a vehicle of a special type adapted for use only in   a   factory   or   in   any   other   enclosed premises or a vehicle having less than four wheels   fitted   with   engine   capacity   of   not exceeding  twenty­five cubic centimetres; (31) “permit” means a permit issued by a State or Regional Transport Authority or an authority   prescribed   in   this   behalf   under this   Act   authorising   the   use   of   a   motor vehicle as a transport vehicle;”  6 On a perusal of both the definitions, it is quite clear that a permit has to be issued by the competent authority under the Act for use of a motor vehicle as a transport vehicle. The emphasis is on the words “use” as well as “transport vehicle”.   8. Section 2(47) states that “transport vehicle” means a public service vehicle, a goods carriage, an educational institution bus or a private service vehicle. Section 66 stipulates necessity for permits.   Sub­section   (1)   thereof   provides   that   n o   owner   of   a motor vehicle shall use or permit the use of the vehicle as a transport vehicle in any public place, whether or not such vehicle is actually carrying any passengers or goods save in accordance with the conditions of a permit granted or countersigned by a Regional   or   State   Transport   Authority   or   any   prescribed authority.   Various provisos have been appended to the main provision   stipulating   conditions   for   use   of   the   vehicle   and purpose of carriage of goods vehicle.  Sub­section (2) states that the holder of a goods carriage permit may use the vehicle for the drawing of any trailer or semi­trailer not owned by him, subject to   such   conditions   as   may   be   prescribed.   It   is   necessary   to mention here that a proviso has been added by Act 54 of 1994 with effect from 14.11.1994 allowing the holder of a permit of any 7 articulated   vehicle   to  use   the   prime­mover   of   that   articulated vehicle for any other semi­trailer. Section 2(2) defines “articulated vehicle”   to   mean   a   motor   vehicle   to   which   a   semi­trailer   is attached. 

carves out certain exceptions to sub­section (1). The relevant part of sub­section (3) is extracted below:­

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appellant No. 2 did not have a permit for the vehicle. There is no dispute that the vehicle initially had a temporary registration and eventually   the   permanent   registration.   It   is   the   stand   of   the appellants   that   the   tribunal   and   the   High   Court   did   not appreciate that the chasis of the vehicle was sent to the body where the body of the truck was fabricated and when the vehicle was driven out of the work shop at which point of time it met with an accident. A contention has been made that the insurance policy was in force at the relevant time and, hence, the insurer is

made   between   “route   permit”   and   “permit”   in   the   context   of Section 149 of the Act. Section 149(2) provides the grounds that can be taken as defence by the insurer. It enables the insurer to defend on the ground that there has been breach of a specific condition of the policy, namely, (i) a condition that excludes the use of the vehicle, ­ (a) for hire or reward, where the vehicle is, on the date of the contract of insurance, a vehicle not covered by a permit to ply for hire or reward, or (b) for organized racing and speed testing, or (c) for a purpose not allowed by the permit under which the vehicle is used, where the vehicle is a transport 10 vehicle, or (d) without side­car being attached where the vehicle is a motor cycle.  That apart, it also entitles the insurer to raise the issue pertaining to a condition that excludes driving by a named  person   or   persons   or   by   any   person   who   is   not   duly licensed or by any person who has been disqualified for holding or obtaining a driving licence during the period of disqualification or that excludes liability for injury caused or contributed to by conditions of war, civil war, riot or civil commotion.   A further defence that can be availed of by the insurer is that the policy is void on the ground that it has been obtained by non­disclosure of the material fact or by representation of act which is false in the material particular. 

the driver, it is evident that the factum of accident having been caused by the vehicle in question had been denied.  That apart, there is also a denial of liability that relates to the manner in which the accident had occurred as alleged in the claim petition. It was the specific assertion of the insurer before the tribunal that the vehicle was running in contravention of the provisions of the Act, for it did not possess a route permit. The tribunal, on the basis of the materials brought on record to the effect that the 11 route   permit   was   issued   on   27.02.2013   and   the   accident occurred on 19.02.2013, returned a finding that the vehicle in question did not have the permit. As stated earlier, the High Court has affirmed the same.

obtaining   factual  matrix,   the   breach   would   not  exonerate  the insurer from satisfying the judgment and an award in terms of Section   149   of   the   Act.   He   has   drawn   inspiration   from   the

5 v. Swaran Singh and others . In the said case, the Court was dealing with the interpretation of Section 149(2)(a)(ii) vis­à­vis the proviso appended to sub­sections (4) and (5) of Section 149 of the Act.  The issue centrally pertained to the necessity of having a driving licence. After adverting to various provisions, the Court also delved into the fundamental concept of third party right. Regard being had to the nature of the beneficial legislation, the Court observed:­ “39. The question as to whether an insurer can avoid its liability in the event it raises a defence as envisaged in sub­section (2) of Section 149 of the Act corresponding to sub­ section   (2)   of   Section   96   of   the   Motor 5 (2004) 3 SCC 297 12

13. The Court posed the question as to whether an insurer can avoid its liability in the event it raised the defence as envisaged in sub­section (2) of Section 149 of the Act corresponding to sub­ section (2)  of  Section 96 of the Motor Vehicles Act, 1939. The Court   analysed   the   language   employed   in   sub­section   (2)   of Section 149, specifically clause (a), and, after scrutinizing the same and referring to various authorities, opined:­ “69. The 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 6 its liability. (See Sohan Lal Passi ) 70. 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   a different   problem   which   must   be   resolved having regard to a large number of factors 6 Sohan Lal Passi v. P. Sesh Reddy and others, (1996) 5 SCC 21 13 governing   the   case   including   conduct   of parties as regards 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 hard­and­fast 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   the   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. 71.   In   the   aforementioned   backdrop,   the provisions   of   sub­sections   (4)   and   (5)   of Section 149 of the Motor Vehicles Act, 1988 may be considered as to the liability of the insurer   to   satisfy   the   decree   at   the   first instance. x  x  x 83.   Sub­section   (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 not 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 14 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.   Sub­ section   (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 sub­section (1) thereof. The right to avoid liability in terms of sub­ section (2) of  Section 149 is restricted as has been discussed hereinbefore.  It is 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.” [Emphasis supplied] 14. We may fruitfully note that the three­Judge Bench adverted to situations where the driver does not have a licence and the same has been allowed to be driven by the owner of the vehicle by   such   person,   the   insurer   would   be   entitled   to   succeed   in defence and avoid liability, but the position would be different where the  disputed  question of  fact arises as  to  whether  the driver had a valid licence and where the owner of the vehicle committed a breach of the terms of the contract of insurance as 15 also the provisions of the Act by consciously allowing any person to drive a vehicle who did not have a valid driving licence. 15. The Court held that if, on facts, it is found that the accident was   caused   solely   because   of   some   other   unforeseen   or intervening   causes   like   mechanical   failures   and   similar   other causes   having   no   nexus   with   the   driver   not   possessing   the requisite type of licence, the insurer will not be allowed to avoid its liability merely for technical breach of conditions concerning driving licence. That apart, minor and inconsequential deviations with regard to licensing conditions would not constitute sufficient ground   to   deny   the   benefit   of   coverage   of   insurance   to   third parties.  The other category of cases that the Court addressed to included cases where the licence of the driver is found to be fake. In that context, the Court expressed its general agreement with 7 United   India   Insurance   Co.   Limited   v.   Lehru   and   stated thus:­ “92. … In   Lehru case   the matter has been considered in some detail. 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   the   law   in   terms whereof   the   insurer   is   to   establish   wilful 7 (2003) 3 SCC 338 16 breach on the part of the insured and not for the purpose of  its disentitlement from raising any defence or for the owners to be absolved from any liability whatsoever ..” 16. The three­Judge Bench summed up its conclusions and we think it appropriate to reproduce the relevant part of the same:­ “110. (iii) The breach of policy condition e.g. disqualification   of   the   driver   or   invalid driving licence of the driver, as contained in sub­section (2)(a)(ii) of Section 149, has to be proved to have been committed by the insured for avoiding liability by the insurer. Mere absence, fake or invalid driving licence or disqualification of the driver for driving at the   relevant   time,   are   not   in   themselves defences   available   to   the   insurer   against either the insured or the third parties. To avoid its liability towards the insured, the insurer has to prove that the insured was guilty   of   negligence   and   failed   to   exercise reasonable care in the matter of fulfilling the condition   of   the   policy   regarding   use   of vehicles by a duly licensed driver or one who was not disqualified to drive at the relevant time. x x x x (vi) Even where the insurer is able to prove breach   on   the   part   of   the   insured concerning   the   policy   condition   regarding holding of a valid licence by the driver or his qualification   to   drive   during   the   relevant period, the insurer would not be allowed to avoid its liability towards the insured unless the   said   breach   or   breaches   on   the 17 condition   of   driving   licence   is/are   so fundamental   as   are   found   to   have contributed   to   the   cause   of   the   accident. The   Tribunals   in   interpreting   the   policy conditions   would   apply   “the   rule   of   main purpose” and the concept of “fundamental breach” to allow defences available to the insurer under Section 149(2) of the Act. (vii) The question, as to whether the owner has taken reasonable care to find out as to whether the driving licence produced by the driver (a fake one or otherwise), does not fulfil   the   requirements   of   law   or   not   will have to be determined in each case.” 17. Learned counsel for the appellants would submit that there has been no fundamental breach of the policy conditions. In this context,   we   may   profitably   refer   to   the   decision   in   Challa   (supra)   wherein   a   two­Judge   Bench   squarely Bharathamma dealt with the absence of a permit and ruled that plying a vehicle without a permit is an infraction and insurer is not liable. 8 18. In   Lakhmi Chand v. Reliance General Insurance , the Court   was   concerned   with   an   order   passed   by   the   National Consumer   Disputes   Redressal   Commission   (NCDRC)   that   had declined the relief to the petitioner therein. The insurer in the said case had taken the plea that the complainant had violated the terms and conditions of the policy, for five passengers were 8 (2016) 3 SCC 100 18 travelling   in   the   goods   carrying   vehicle   at   the   time   of   the accident, whereas the permitted seating capacity of the motor vehicle of the appellant was only 1 + 1. The two­Judge Bench referred to  Oriental Insurance Co. Ltd. v. Meena Variyal and 9 others  and expressed the view that in order to avoid liability, the insurer must establish that there was breach on the part of the insured.  19. The obtaining fact situation is sought to be equated with the factual score in the said case.  In this regard, it is useful to refer to the Bench decision in  HDFC Bank Limited v. Reshma and 10 . The issue that arose before the Court was whether the others financier was liable to pay the compensation or it was the liability of the borrower. The tribunal had returned the finding that the duty of the financier was to see that the borrower did not neglect to   get   the   vehicle   insured   and,   therefore,   it   was   jointly   and severally   liable   along   with   the   owner.   The   High   Court   had concurred   with   the   said   conclusion.     The   Court   referred   to 11 Purnya Kala Devi v. State of Assam and other  that has dealt with   the   definition   of   the   term   “owner”   as   contained   in 9 (2007) 5 SCC 428 10 (2015) 3 SCC 679 11 (2014) 14 SCC 142 19 Section 2(30) of the Act. In the said case, the vehicle in question was   under   the   requisition   of   the   State   of   Assam   under   the provisions of law. In that context, the Court has expressed that:­ “16. … The High Court failed to appreciate that   at   the   relevant   time   the   offending vehicle   was   under   the   requisition   of Respondent   1   State   of   Assam   under   the provisions   of   the   Assam   Act.   Therefore, Respondent 1 was squarely covered under the   definition   of   ‘owner’   as   contained   in Section   2(30)   of   the   1988   Act.   The   High Court   failed   to   appreciate   the   underlying legislative   intention   in   including   in   the definition of ‘owner’ a person in possession of a vehicle either under an agreement of lease   or   agreement   of   hypothecation   or under   a   hire­purchase   agreement   to   the effect   that   a   person   in   control   and possession   of   the   vehicle   should   be construed as the ‘owner’ and not alone the registered   owner.   The   High   Court   further failed to appreciate the legislative intention that   the   registered   owner   of   the   vehicle should not be held liable if the vehicle was not in his possession and control. The High Court also failed to appreciate that Section 146 of the 1988 Act requires that no person shall use or cause or allow any other person to   use   a   motor   vehicle   in   a   public   place without   an   insurance   policy   meeting   the requirements of Chapter XI of the 1988 Act and the State Government has violated the statutory provisions of the 1988 Act.” 20. Be it noted, in the said case, the liability was fixed on the State keeping in view the legislative intention behind Section 146 20 of the Act, no person shall use or cause or allow any other person to use a motor vehicle in a public place without an insurance policy as that is the mandatory statutory requirement under the Act. Emphasis was laid on possession and control of the vehicle and accordingly liability was fixed on the State of Assam.  21. In   (supra),   the   three­Judge   Bench HDFC   Bank   Limited   opined that the hypothecation agreement did not convey that the appellant financier had become the owner and was in control and possession   of   the   vehicle.   It   was   the   absolute   fault   of   the respondent No. 2 to take the vehicle from the dealer without full payment   of   the   insurance,   more   so   when   nothing   had   been brought on record that the said fact was known to the appellant financier or that it was done in collusion with the financier.  22. The Court held that when the intention of the legislature is quite clear to the effect that a registered owner of the vehicle should not be held liable if the vehicle is not in his possession and   control   and   there   was   evidence   on   record   that   the respondent   No.   2,   plied   the   vehicle   without   the   insurance   in violation of the statutory provision contained in Section 146 of the Act, the High Court could not have mulcted the liability on 21 the   financier   and   finally,   the   financer   was   absolved   of   the liability. 23. In the case at hand, it is clearly demonstrable from the materials brought on record that the vehicle at the time of the accident did not have a permit. The appellants had taken the stand that the vehicle was not involved in the accident. That apart, they had not stated whether the vehicle had temporary permit or any other kind of permit. The exceptions that have been   carved   out   under   Section   66   of   the   Act,   needless   to emphasise, are to be pleaded and proved. The exceptions cannot be taken aid of in the course of an argument to seek absolution from liability. Use of a vehicle in a public place without a permit is a fundamental statutory infraction.  We are disposed to think so in view of the series of exceptions carved out in Section 66. The said situations cannot be equated with absence of licence or a fake licence or a licence for different kind of vehicle, or, for that matter,   violation   of   a   condition   of   carrying   more   number   of passengers.   Therefore,   the   principles   laid   down   in   Swaran Singh  (supra) and  Lakhmi Chand  (supra) in that regard would not be applicable to the case at hand. That apart, the insurer had taken the plea that the vehicle in question had no permit. It does 22 not require the wisdom of the “Tripitaka”, that the existence of a permit   of   any   nature   is   a   matter   of   documentary   evidence. Nothing has been brought on record by the insured to prove that he had a permit of the vehicle. In such a situation, the onus cannot be cast on the insurer. Therefore, the tribunal as well as the High Court had directed the insurer was required to pay the compensation amount to the claimants with interest with the stipulation that the insurer shall be entitled to recover the same from   the   owner   and   the   driver.   The   said   directions   are   in consonance with the principles stated in   (supra) Swaran Singh and other cases pertaining to pay and recover principle.  24. In view of the aforesaid analysis, we do not perceive any merit in the appeal and, accordingly, the same stands dismissed without any order as to costs.             ……………………….....CJI.       (Dipak Misra)    ………………………….….J.                      (A.M. Khanwilkar) New Delhi; May 17, 2018