Full Judgment Text
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CASE NO.:
Appeal (civil) 648 of 2008
PETITIONER:
Oriental Insurance Co. Limited
RESPONDENT:
Prithvi Raj
DATE OF JUDGMENT: 24/01/2008
BENCH:
Dr. ARIJIT PASAYAT & P. SATHASIVAM
JUDGMENT:
J U D G M E N T
(Arising out of S.L.P. (C) No.12607 of 2005)
DR. ARIJIT PASAYAT, J:
1. Heard learned counsel for the parties.
2. Leave granted.
3. Challenge in this appeal is to the order passed by
the National Consumer Disputes Redressal Commission, New
Delhi (in short ‘the Commission’) allowing the First Appeal
filed by the appellant before it (the respondent herein). He is
hereinafter referred to as the complainant. Before the
Himachal Pradesh State Consumer Disputes Redressal
Commission (in short the State Commission), the complainant
had filed a complaint alleging that a Mini Bus owned by the
complainant met with an accident during the period when the
Insurance Cover/policy issued by the appellant-Insurance
Company was in currency. The incident was reported to the
Insurance Company but the claim was not settled on the
ground that the Driver of the offending vehicle did not have a
valid and operating driving license. The complainant took the
stand that there was a renewal of the driving license which
was valid and legal and, therefore, the claim could not have
been repudiated by the Insurance Company. The State
Commission rejected the plea, categorically holding that there
was no valid license issued by the R.T.A, Hyderabad, as
claimed by the Driver.
4. In appeal by the impugned order, a contrary view
was taken and it was held that it was accepted, as rightly
noted by the State Commission, that the licensing authority at
Hyderabad had not issued any license as claimed. Yet, in view
of the fact that there was a renewal at Tinsukhia, the claim
could not have been refused by the insurance company.
Reliance was placed on a decision of this Court in United
India Insurance Co. Limited Vs. Lehru and Ors. (2003 (3) SCC
338) in support of the view.
5. Learned counsel for the appellant-insurance
company submitted that Lehru’s case (supra) related to a
third party claim and not an own damage claim.
6. Learned counsel for the respondent, on the other
hand, relied on a decision of this Court in Lal Chand Vs.
Oriental Insurance Co. Ltd. (2006 (8) SCALE 531) to contend
that the view taken by the National Commission was correct.
Reliance has also been placed on a decision of this Court in
National Insurance Co. Ltd. Vs. Swaran Singh & Ors. (2004 (3)
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SCC 297).
7. It is to be noted that Swaran Singh’s case (supra)
was rendered in the background of Section 149 of the Motor
Vehicles Act, 1988 (in short the ‘Act’).
8. This Court had occasion to deal with a similar issue
in National Insurance Co. Ltd. Vs. Laxmi Narain Dhut (2007
(3) SCR 579). It was inter alia held as follows:
\0238. Section 149 of the Act relates to duty
of insurers to satisfy judgments and awards
against persons insured in respect of third
party risks. The language of the provision is
clear that it only relates to third party risk. The
corresponding provision in the Old Act is
Section 96. Section 166 of the Act relates to
application for compensation. The same
corresponds to Section 110-A of the Old Act.
Section 168 of the Act relates to award of the
Claims Tribunal which corresponds to Section
110-B of the Old Act. Section 170 deals with
impleadment of the insurer in certain cases.
Section 149 of the Act needs to be noted in
full. The same reads as follows:
"149. Duty of Insurers to satisfy
judgments and awards against persons
insured in respect of third party risks- (1)
If, after a certificate of insurance has been
issued under sub-section (3) of Section
147, in favour of the person by whom a
policy has been effected, judgment or
award in respect of any 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) or under the provisions of
Section 163-A) is obtained against any
person insured by the policy then,
notwithstanding that the insurer may be
entitled to avoid or cancel or may have
avoid or cancelled the policy, the insurer
shall, subject to the provisions of this
section, pay to the person entitled to the
benefit of the decree any sum not
exceeding the sum assured payable
thereunder, as if 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 or award
unless, before the commencement of the
proceedings in which the judgment or
award is given the insurer had notice
through the Court or, as the case may be,
the Claims Tribunal of the bringing of the
proceedings, or in respect of such
judgment or award so long as execution is
stayed thereon pending an appeal; and an
insurer to whom notice of the bringing of
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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:-
(a) that there has been a breach of a
specified condition of the policy, being one
of the following conditions, namely:-
(i) a condition excluding 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 vehicle, or
(d) without side-car being attached where
the vehicle is a motor cycle; or
(ii) a condition excluding driving by a
named person or persons or by any
person who is not duly licensed, or by any
person who has been disqualified for
holding or obtaining a driving licence
during the period of dis-qualification; or
(iii) a condition excluding liability for injury
caused or contributed to by conditions of
war, civil war, riot or civil commotion; or
(b) that the policy is void on the ground
that it was obtained by the non-disclosure
of a material fact or by a representation of
fact which was false in some material
particular.
(3) Where any such judgment as is
referred to in sub-section (1) is obtained
from a Court in a reciprocating country
and in the case of a foreign judgment is,
by virtue of the provisions of section 13 of
the Code of Civil Procedure, 1908 (5 of
1908) conclusive as to any matter
adjudicated upon by it, the insurer (being
an insurer registered under the Insurance
Act, 1938 (4 of 1938) and whether or not
he is registered under the corresponding
law of the reciprocating country) shall be
liable to the person entitled to the benefit
of the decree in the manner and to the
extent specified in sub-section (1), as if
the judgment were given by a Court in
India:
Provided that no sum shall be payable by
the insurer in respect of any such
judgment unless, before the
commencement of the proceedings in
which the judgment is given, the insurer
had notice through the Court concerned
of the bringing of the proceedings and the
insurer to whom notice is so given is
entitled under the corresponding law of
the reciprocating country, to be made a
party to the proceedings and to defend the
action on grounds similar to those
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specified in sub-section (2).
(4) Where a certificate of insurance has
been issued under sub-section (3) of
section 147 to the person by whom a
policy has been effected, so much of the
policy as purports to restrict the insurance
of the persons insured thereby by
reference to any condition other than
those in clause (b) of sub-section (2) shall,
as respects such liabilities as are required
to he covered by a policy under clause (b)
of sub-section (1) of section 147, 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.
(5) 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 the policy in respect of that
liability, the insurer shall he entitled to
recover the excess from that person.
(6) In this section the expression "material
fact" and "material particular" means,
respectively a fact or particular of such a
nature as to influence the judgment of a
prudent insurer in determining whether
he will take the risk and, if so, at what
premium and on what conditions, and the
expression "liability covered by the terms
of the policy" means a liability which is
covered by the policy or which would be
so covered but for the fact that the insurer
is entitled to avoid or cancel or has
avoided or cancelled the policy.
(7) No insurer to whom the notice referred
to in sub-section (2) or sub-section (3) has
been given shall be entitled to avoid his
liability to any person entitled to the
benefit of any such judgment or award as
is referred to in sub-section (1) or in such
judgment as is referred to in sub-section
(3) otherwise than in the manner provided
for in sub-section (2) or in the
corresponding law of the reciprocating
country, as the case may be.
Explanation: For the purposes of this
section, "Claims Tribunal" means a Claims
Tribunal constituted under Section 165
and "award" means an award made by
that Tribunal under Section 168."
\0239. In Swaran Singh’s case (supra) on
which learned counsel for the parties
have placed reliance undisputedly
related to a case under Section 149 of
the Act. This Court elaborately dealt with
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the scope and ambit of Sections 147 and
149 of the Act and after tracing the
history of compulsory insurance and the
rights of the third parties, held that the
concerned cases were mainly concerned
with third party rights under the policy.
It was held in that context that any
condition in the policy whereby the right
of the third party is taken away would be
void, as noted in para 23 of the
judgment.
10 In paras 69 and 70 the principles
were culled out in the following terms:
"The Insurance Company is required to
prove the breach of the condition of the
contract of insurance by cogent
evidence. In the event the Insurance
Company fails to prove that there has
been breach of conditions of the policy
on the part of the insured, the Insurance
Company cannot be absolved of its
liability. This Court did not lay down a
degree of proof, but held that the parties
alleging the breach must be held to have
succeeded in establishing the breach of
the condition of the contract of
insurance, on the part of the Insurance
Company by discharging its burden of
proof. The Tribunal, must arrive at a
finding on the basis of the materials
available on the records".
11. In para 110 also the summary of the
findings were recorded which reads as
follows:
(i) Chapter XI of the Motor Vehicles Act,
1988 providing compulsory insurance of
vehicles against third-party risks is a
social welfare legislation to extend relief
by compensation to victims of accidents
caused by use of motor vehicles. The
provisions of compulsory insurance
coverage of all vehicles are with this
paramount object and the provisions of
the Act have to be so interpreted as to
effectuate the said object.
(ii) An insurer is entitled to raise a defence
in a claim petition filed under Section
163-A or Section 166 of the Motor
Vehicles Act, 1988, inter alia, in terms of
Section 149(2)(a)(ii) of the said Act.
(iii) The breach of policy condition e.g.
disqualification of the driver or invalid
driving licence of the driver, as contained
in sub-section (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
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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.
(iv) Insurance companies, however, with a
view to avoid their liability must not only
establish the available defence(s) raised in
the said proceedings but must also
establish "breach" on the part of the
owner of the vehicle; the burden of proof
wherefore would be on them.
(v) The court cannot lay down any criteria
as to how the said burden would be
discharged, inasmuch as the same would
depend upon the facts and circumstances
of each case.
(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 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.
(viii) If a vehicle at the time of accident
was driven by a person having a learner’s
licence, the insurance companies would
be liable to satisfy the decree.
(ix) The Claims Tribunal constituted under
Section 165 read with Section 168 is
empowered to adjudicate all claims in
respect of the accidents involving death or
of bodily injury or damage to property of
third party arising in use of motor vehicle.
The said power of the Tribunal is not
restricted to decide the claims inter se
between claimant or claimants on one
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side and insured, insurer and driver on
the other. In the course of adjudicating
the claim for compensation and to decide
the availability of defence or defences to
the insurer, the Tribunal has necessarily
the power and jurisdiction to decide
disputes inter se between the insurer and
the insured.
(x) The decision rendered on the claims
and disputes inter se between the insurer
and insured in the course of adjudication
of claim for compensation by the
claimants and the award made thereon is
enforceable and executable in the same
manner as provided in Section 174 of the
Act for enforcement and execution of the
award in favour of the claimants.
(x) Where on adjudication of the claim
under the Act the Tribunal arrives at a
conclusion that the insurer has
satisfactorily proved its defence in
accordance with the provisions of Section
149(2) read with sub-section (7), as
interpreted by this Court above, the
Tribunal can direct that the insurer is
liable to be reimbursed by the insured for
the compensation and other amounts
which it has been compelled to pay to the
third party under the award of the
Tribunal. Such determination of claim by
the Tribunal will be enforceable and the
money found due to the insurer from the
insured will be recoverable on a certificate
issued by the Tribunal to the Collector in
the same manner under Section 174 of
the Act as arrears of land revenue. The
certificate will be issued for the recovery
as arrears of land revenue only if, as
required by sub-section (3) of Section 168
of the Act the insured fails to deposit the
amount awarded in favour of the insurer
within thirty days from the date of
announcement of the award by the
Tribunal.
(xi) The provisions contained in
sub-section (4) with the proviso
thereunder and sub-section (5) which are
intended to cover specified contingencies
mentioned therein to enable the insurer
to recover the amount paid under the
contract of insurance on behalf of the
insured can be taken recourse to by the
Tribunal and be extended to claims and
defences of the insurer against the
insured by relegating them to the remedy
before regular court in cases where on
given facts and circumstances
adjudication of their claims inter se might
delay the adjudication of the claims of the
victims".
12. At this juncture, it would be necessary
to test the logic behind Section 149 of the
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Act. The conditions under the said provision
relate only to third party risks and claims.
17. Section 149 is part of Chapter XI which
is titled "Insurance of Motor Vehicles against
Third Parties". 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.
18. It is also to be noted that the terms of
the policy have to be construed as it is and
there is no scope for adding or subtracting
something. However liberally the policy may
be construed, such liberalism cannot be
extended to permit substitution of words
which are not intended. (See United India
Insurance Co. Ltd. V Harchand Rai Chandan
Lal (2004 (8) SCC 644 and Polymat India (P)
Ltd. V. National Insurance Company Ltd. and
Ors. (2005 (9) SCC 174).
19. The primary stand of the insurance
company is that the person driving the
vehicle did not have a valid driving license. In
Swaran Singh’s case (supra) the following
situations were noted:
(i) the driver had a license but it was fake;
(ii) the driver had no license at all;
(iii)the driver originally had a valid license
but it had expired as on the date of the
accident and had not been renewed;
(iv)the license was for a class of vehicles
other than that which was the insured
vehicle;
(v) the license was a learner’s license.
Category (i) may cover two types of situations.
First, the license itself was fake and the
second is where originally that license is fake
but there has been a renewal subsequently
in accordance with law.
20. Chapter II contains Sections 3, 4 and 5 of
the Act relating to licensing of drivers driving the
motor vehicles.
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 license has to be
considered differently in respect of third party and
in respect of own damage claims.
25. It would be appropriate to take note of what
was stated in Complete Insulations (P) Ltd. v. New
India Assurance Co. Ltd. (1996 (1) SCC 221). In
paras 9 and 10 it was observed as follows:
"9. Section 157 appears in Chapter XI
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entitled "Insurance of Motor vehicles
against Third Party Risks" and comprises
Sections 145 to 164. Section 145 defines
certain expressions used in the various
provisions of that Chapter. The
expression "Certificate of Insurance"
means a certificate issued by the
authorised insurer under Section 147(3).
"Policy of Insurance" includes a certificate
of insurance. Section 146(1) posits that
"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". Of course
this provision does not apply to vehicles
owned by the Central or State
Government and used for Government
purposes not connected with any
commercial enterprise. This provision
corresponds to Section 94 of the old Act.
Section 147 provides that the policy of
insurance to be issued by the authorized
insurer must insure the specified person
or classes of persons against any liability
incurred in respect of death of or bodily
injury to any person or damage to any
property of a third party as well as against
the death of or bodily injury caused to any
passenger of a public service vehicle
caused by or arising out of the use of the
vehicle in a public place. This provision is
akin to Section 95 of the old Act. It will be
seen that the liability extends to damage
to any property of a third party and not
damage to the property of the owner of
the vehicle, i.e., the insured. Sub-section
(2) stipulates the extent of liability and in
the case of property of a third party the
limit of liability is Rupees six thousand
only. The proviso to that sub-section
continues the liability fixed under the
policy for four months or till the date of its
actual expiry, whichever is earlier, Sub-
section (3) next provides that the policy of
insurance shall be of no effect unless and
until the insurer has issued a certificate
of insurance in the prescribed form. The
next important provision which we may
notice is Section 156 which sets out the
effect of the certificate of insurance. It
says that when the insurer issues the
certificate of insurance, then even if the
policy of insurance has not as yet been
issued the insurer shall, as between
himself and any other person except the
insured be deemed to have issued to the
insured a policy of insurance conforming
in all respects with the description and
particulars stated in the certificate. It is
obvious on a plain reading of this
provision that the legislature was anxious
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to protect third-party interest. Then comes
Section 157 which we extracted earlier.
This provision lays down that when the
owner vehicle in relation whereto a
certificate of insurance is issued transfers
to another person the ownership of the
motor vehicle, the certificate of insurance
together with the policy described therein
shall be deemed to have been transferred
in favour of the new owner of the vehicle
with effect from the date of transfer. Sub-
section (2) requires the transferee to apply
within fourteen days from the date of
transfer to the insurer for making
necessary changes in the certificate of
insurance and the policy described
therein in his favour. These are the
relevant provisions of Chapter XI which
have a bearing on the question of
insurer’s liability in the present case.
10. There can be no doubt that the said
chapter provides for compulsory
insurance of vehicles to cover third-party
risks. Section 146 forbids the use of a
vehicle in a public place unless there is in
force in relation to the use of that vehicle
a policy of insurance complying with the
requirements of that chapter. Any breach
of this provision may attract penal action.
In the case of property, the coverage
extends to property of a third party i.e. a
person other than the insured. This is
clear from Section 147(1)(b)(i) which
clearly refers to "damage to any property
of a third party" and not damage to the
property of the ’insured’ himself. And the
limit of liability fixed for damage to
property of a third party is Rupees six
thousand only as pointed out earlier. That
is why even the Claims Tribunal
constituted under Section 165 is invested
with jurisdiction to adjudicate upon claims
for compensation in respect of accidents
involving death of or bodily injury to
persons arising out of the use of motor
vehicles, or damage to any property of a
third party so arising, or both. Here also it
is restricted to damage to third-party
property and not the property of the
insured."
26. The restrictions relating to appeal in terms
of Section 173 (2) does not apply to own damage
cases.
38. The inevitable conclusion therefore is that
the decision in Swaran Singh’s case (supra) has no
application to own damage cases. The effect of fake
license has to be considered in the light of what has
been stated by this Court in New India Assurance
Co., Shimla v. Kamla and Ors. (2001 (4) SCC 342).
Once the license is a fake one the renewal cannot
take away the effect of fake license. It was observed
in Kamla’s case (supra) as follows:
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"12. As a point of law we have no manner
of doubt that a fake licence cannot get its
forgery outfit stripped off merely on
account of some officer renewing the same
with or without knowing it to be forged.
Section 15 of the Act only empowers any
Licensing Authority to "renew a driving
licence issued under the provisions of this
Act with effect from the date of its expiry".
No Licensing Authority has the power to
renew a fake licence and, therefore, a
renewal if at all made cannot transform a
fake licence as genuine. Any counterfeit
document showing that it contains a
purported order of a statutory authority
would ever remain counterfeit albeit the
fact that other persons including some
statutory authorities would have acted on
the document unwittingly on the
assumption that it is genuine".
39. As noted above, the conceptual
difference between third party right and own
damage cases has to be kept in view. Initially,
the burden is on the insurer to prove that the
license was a fake one. Once it is established
the natural consequences have to flow.\024
9. The above aspects were highlighted recently in Laxmi
Narain Dhut case (supra).
10. In the instant case, the State Commission has
categorically found that the evidence on record clearly
established that the licensing authority had not issued any
license, as was claimed by the Driver and the respondent.
The evidence of Shri A.V.V. Rajan, Junior Assistant of the
Office of the Jt. Commissioner & Secretary, RTA, Hyderabad
who produced the official records clearly established that no
driving license was issued to Shri Ravinder Kumar or
Ravinder Singh in order to enable and legally permit him to
drive a motor vehicle. There was no cross examination of the
said witness. The National Commission also found that there
was no defect in the finding recorded by the State
Commission in this regard.
11. It appears that pursuant to the orders dated
14.07.2005 passed by this Court, the entire amount awarded
was deposited in this Court. Since, we have held that the
appellant-Insurance Company has no liability, the amount
deposited be returned to the appellant-Insurance Company
with accrued interest, if any.
12. The appeal is allowed. No costs.