MANAGER, NATIONAL INSURANCE CO.LTD. vs. SAJU P.PAUL

REPORTABLE IN THE SUPREME COURT OF INDIA

Manager, National Insurance Co. Ltd. …… Appellant Vs. Saju P. Paul and Another ……Respondents JUDGMENT R.M. LODHA, J. JUDGMENT Leave granted. 2. The appellant, insurance company, is in appeal by special leave against the judgment and order dated 23.03.2011 whereby the Division Bench of the Kerala High Court allowed the review petition and reviewed its order dated 09.11.2010 and held that the insurance company was liable to pay compensation in sum of Rs. 2,88,000/- with 9% interest 1 Page 1 thereon to the claimant awarded by the Motor Accident Claims Tribunal in its award dated 23.07.2002. 3. The question of law that arises in this appeal is as to whether

‘1988 Act’), the insurance company is liable to pay compensation for the bodily injury caused to the claimant who was travelling in a goods vehicle as a spare driver though he was employed as a driver in another vehicle owned by the owner of the vehicle under the policy of insurance. 4. The above question arises in this way. Saju P. Paul, claimant (Respondent No. 1), was a heavy vehicle driver. He was employed with Respondent No. 2 as a driver in some other vehicle. On 16.10.1993, he was travelling in a goods vehicle bearing No. KL-2A/3411 in the cabin. The goods vehicle was being driven by one Jayakumar. In that vehicle, many other persons were also travelling. At Nilackal, due to rash and negligent JUDGMENT driving of the driver Jayakumar, the goods vehicle capsized. As a result of which the claimant suffered fracture and injuries. The claimant remained under treatment for quite some time and the injuries that he sustained in the accident rendered him permanently disabled. In the claim petition filed by him before the Motor Accident Claims Tribunal, Pathanamthitta (for short, ‘the Tribunal’), he claimed compensation of Rs.3,00,000/-. The owner and insurer were impleaded as respondent no. 2 and respondent no. 3 respectively in the claim petition. 2 Page 2 5. The insurer filed its written statement and opposed the claimant’s claim insofar as it was concerned. The insurer set up the plea that the vehicle was a goods vehicle and the risk of the passengers

insurance. It was stated in the written statement that nearly 50 unauthorised passengers were travelling at the time of accident; they were not traveling in the vehicle in pursuance of the contract of employment, such as loading and unloading nor they were travelling as the owner of the goods or the representative of the owner of the goods and hence the insurer could not be saddled with any liability. 6. The Tribunal, after recording the evidence and hearing the parties, on 23.07.2002, passed an award in favour of the claimant holding that he was entitled to a total compensation of Rs. 3,00,000/-. The liability of the insurer was made joint and several with the owner and driver. JUDGMENT 7. Being not satisfied with the award of the Tribunal, the insurer filed an appeal before the Kerala High Court. The Division Bench of that Court by relying upon decisions of this Court in New India Assurance Co. 1 Ltd. v. Asha Rani and others and National Insurance Co. Ltd. v. Cholleti 2 Bharatamma and Others allowed the appeal of the insurer vide judgment and order dated 09.11.2010. The Division Bench held that insurer was not liable as gratuitous passengers travelling in a goods vehicle were not 1 (2003) 2 SCC 223 2 (2008) 1 SCC 423 3 Page 3 covered under the policy and the claimant shall be entitled to recover the awarded amount from the owner or driver of the vehicle. 8. The claimant sought review of the order dated 09.11.2010 and,

allowed. While allowing the review application, the Division Bench held as under: “ It has already been noticed that the petitioner was admittedly a spare driver of the vehicle. It may be true that he was not driving the vehicle at the relevant point of time; but he was directed to go to the worksite by his employer as a spare driver in the vehicle. Therefore, by no stretch of imagination, it can be said that the petitioner was not travelling in the vehicle in the course of his employment and as directed by his employer. Section 147(1)(b)(i) takes within its fold any liability which may be incurred by the insurer in respect of the death or bodily injury to any person. Therefore, the argument of the insurance company that no goods were being carried in the vehicle at the time of accident and therefore, the petitioner was only a gratuitous passenger cannot be countenanced at all. Even otherwise, the first proviso to Section147(1) will cast a liability on the insurer to indemnify the owner in respect of the injury sustained by the employee of the insured arising out of and in the course of his employment.” JUDGMENT 9. It is appropriate to quote Section 147 of the 1988 Act as was obtaining on the date of accident, i.e., 16.10.1993, which reads as follows : “147. Requirements of policies and limits of liability .—(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 authorized insurer; and ( b ) insures the person or classes of persons specified in the policy to the extent specified in sub-section (2)— ( i ) against any liability which may be incurred by him in respect of the death of or bodily injury to any person or damage to any property of a third party caused by or arising out of the use of the vehicle in a public place; 4 Page 4 ( ii ) against the death of or bodily injury to any passenger of a public service vehicle caused by or arising out of the use of the vehicle in a public place:

JUDGMENT 5 Page 5

10. By the Motor Vehicles (Amendment) Act, 1994 (for short, ‘1994 Amendment Act’), Section 147 came to be amended. The expression “including owner of the goods or his authorised representative carried in the vehicle” was added in Section 147. The amended Section 147 has been considered by this Court in various decisions, some of which we intend to refer a little later. JUDGMENT 3 11. In New India Assurance Company v. Satpal Singh and others , this Court with reference to the provisions in the Motor Vehicles Act, 1939 and the provisions in 1988 Act, particularly Section 147, held that under the 1988 Act an insurance policy covering third party risk was not required to exclude gratuitous passengers in a vehicle no matter that the vehicle is of any type or class. It was also held that the earlier decisions of this Court rendered under the 1939 Act vis-à-vis gratuitous passengers were of no avail while considering the liability of the insurance company in respect of 3 (2000) 1 SCC 237 6 Page 6 any accident which occurred or would occur after the 1988 Act came into force. 3 12. The correctness of the judgment in Satpal Singh was doubted,

insofar as cases covered under the 1988 Act prior to its amendment in 1 1994 were concerned. A three-Judge Bench in Asha Rani noticed Section 147 of the 1988 Act prior to its amendment in 1994 and after its amendment in 1994 and held in paragraph 9 of the Report (Pgs. 231-232) as follows : “In Satpal case [(2000) 1 SCC 237] the Court assumed that the provisions of Section 95(1) of the Motor Vehicles Act, 1939 are identical with Section 147(1) of the Motor Vehicles Act, 1988, as it stood prior to its amendment. But a careful scrutiny of the provisions would make it clear that prior to the amendment of 1994 it was not necessary for the insurer to insure against the owner of the goods or his authorised representative being carried in a goods vehicle. On an erroneous impression this Court came to the conclusion that the insurer would be liable to pay compensation in respect of the death or bodily injury caused to either the owner of the goods or his authorised representative when being carried in a goods vehicle the accident occurred. If the Motor Vehicles Amendment Act of 1994 is examined, particularly Section 46, by which the expression “injury to any person” in the original Act stood substituted by the expression “injury to any person including owner of the goods or his authorised representative carried in the vehicle”, the conclusion is irresistible that prior to the aforesaid Amendment Act of 1994, even if the widest interpretation is given to the expression “to any person” it will not cover either the owner of the goods or his authorised representative being carried in the vehicle. The objects and reasons of clause 46 also state that it seeks to amend Section 147 to include owner of the goods or his authorised representative carried in the vehicle for the purposes of liability under the insurance policy. It is no doubt true that sometimes the legislature amends the law by way of amplification and clarification of an inherent position which JUDGMENT 7 Page 7

1 13. S.B. Sinha, J. in his supplementary judgment in Asha Rani , JUDGMENT while concurring with the above, observed as follows (Pg. 235): “26. In view of the changes in the relevant provisions in the 1988 Act vis-à-vis the 1939 Act, we are of the opinion that the meaning of the words “any person” must also be attributed having regard to the context in which they have been used i.e. “a third party”. Keeping in view the provisions of the 1988 Act, we are of the opinion that as the provisions thereof do not enjoin any statutory liability on the owner of a vehicle to get his vehicle insured for any passenger travelling in a goods vehicle, the insurers would not be liable therefor. 27. Furthermore, sub-clause ( i ) of clause ( b ) of sub-section (1) of Section 147 speaks of liability which may be incurred by the owner of a vehicle in respect of death of or bodily injury to any person or damage to any property of a third party caused by or arising out of the use of the vehicle in a 8 Page 8

1 14. Asha Rani has been relied upon in Oriental Insurance Co. Ltd. 4 v. Devireddy Konda Reddy and Others wherein it was held as under (Pgs. 342-343): “….The difference in the language of “goods vehicle” as appearing in the old Act and “goods carriage” in the Act is of significance. A bare reading of the provisions makes it clear that the legislative intent was to prohibit goods vehicle from carrying any passenger. This is clear from the expression “in addition to passengers” as contained in the definition of “goods vehicle” in the old Act. The position becomes further clear because the expression used is “goods carriage” is solely for the carriage of “goods”. Carrying of passengers in a goods carriage is not contemplated in the Act. There is no provision similar to clause ( ii ) of the proviso appended to Section 95 of the old Act prescribing requirement of insurance policy. Even Section 147 of the Act mandates compulsory coverage against death of or bodily injury to any passenger of “public service vehicle”. The proviso makes it further clear that compulsory coverage in respect of drivers and conductors of public service vehicle and employees carried in goods vehicle would be limited to liability under the Workmen's Compensation Act, 1923 (in short “the WC Act”). There is no reference to any passenger in “goods carriage”. JUDGMENT 4 (2003) 2 SCC 339 9 Page 9 14.1. Then in paragraphs 10 and 11 of the Report (Pg. 343), this 4 Court held in Devireddy Konda Reddy as under :

2 15. In Cholleti Bharatamma , this Court was concerned with the question about the liability of the insurance company to indemnify the owner of the vehicle in respect of death of passengers travelling in goods vehicle. The Court considered the applicability of Section 147 as it originally stood under 1988 Act and after its amendment in 1994. In relation to the accident that occurred on 16.12.1993 i.e., prior to the 1994 JUDGMENT amendment in SLP(C) 7237-39/2003, this Court set aside the judgment of the High Court and allowed the appeal of the insurance company by observing as follows (Pg. 430): “14. The date of accident being 16-12-1993, the amendment carried out in the year 1994 in Section 147 of the Motor Vehicles Act would not be applicable. 15. The Motor Accidents Claims Tribunal, Nalgonda, by a judgment and award dated 13-11-1997 awarded various sums overruling the defence of the appellant herein that they were unauthorised passengers. The High Court, however, by reason of the impugned judgment, relying on or on the basis of a decision of this Court in Satpal Singh [(2000) 1 SCC 237] directed as under: 1 Page 10

15.1. With reference to the accident that took place on 24.12.1993 (prior to 1994 amendment) in SLP(C) Nos. 7241-43/2003, this Court in 2 Cholleti Bharatamma in paragraphs 17,18,19,20 and 21 (Pgs. 430-431) held as under : “17. In the aforementioned case, accident took place on 24- 12-1993. The respondents herein filed a claim petition claiming compensation for the death of one Kota Venkatarao who had allegedly paid a sum of Rs 20 for travelling in the lorry. The Tribunal held: JUDGMENT “In the absence of rebuttal evidence from the deceased and some others who travelled in the said vehicle in the capacity of owner of the luggage which was carried by them at the time of accident, it cannot be said that it is a violation of the policy, since it is not fundamental breach so as to afford to the insurer to eschew the liability altogether as per the decision in B.V. Nagaraju v. Oriental Insurance Co. Ltd. [(1996) 4 SCC 647 : AIR 1996 SC 2054] ” 18. The High Court, however, relying upon Satpal Singh [(2000) 1 SCC 237] opined: “This issue raised in this appeal is covered by the decision of the Supreme Court in New India Assurance Co. Ltd. v. Satpal Singh wherein Their Lordships held that under the Motor Vehicles Act, 1988 all insurance policies covering third-party risks are not required to exclude gratuitous passengers in the vehicles though the vehicle is of any type or 1 Page 11

16. In the present case, Section 147 as originally existed in 1988 1 Act is applicable and, accordingly, the judgment of this Court in Asha Rani is fully attracted. The High Court was clearly in error in reviewing its judgment and order delivered on 09.11.2010 in review petition filed by the claimant by applying Section 147(1)(b)(i). The High Court committed grave error in holding that Section 147(1)(b)(i) takes within its fold any liability which may be incurred by the insurer in respect of the death or bodily JUDGMENT injury to any person. The High Court also erred in holding that the claimant was travelling in the vehicle in the course of his employment since he was a spare driver in the vehicle although he was not driving the vehicle at the relevant time but he was directed to go to the worksite by his employer. The High Court erroneously assumed that the claimant died in the course of employment and overlooked the fact that the claimant was not in any manner engaged on the vehicle that met with an accident but he was employed as a driver in another vehicle owned by M/s. P.L. Construction 1 Page 12 Company. The insured (owner of the vehicle) got insurance cover in respect of the subject goods vehicle for driver and cleaner only and not for any other employee. There is no insurance cover for the spare driver in the

passenger though he claimed that he was a spare driver. The insured had paid premium for one driver and one cleaner and, therefore, second driver or for that purpose ‘spare driver’ was not covered under the policy. 17. The High Court misconstrued the proviso following sub-section (1) of Section 147 of the 1988 Act. What is contemplated by proviso to Section 147 (1) is that the policy shall not be required to cover liability in respect of death or bodily injury sustained by an employee arising out of and in the course of his employment other than a liability arising under the Workmen’s Compensation Act, 1923. The claimant was admittedly not driving the vehicle nor he was engaged in driving the said vehicle. Merely JUDGMENT because he was travelling in a cabin would not make his case different from any other gratuitous passenger. 18. The impugned judgment is founded on misconstruction of Section 147. The High Court was wrong in holding that the insurance company shall be liable to indemnify the owner of the vehicle and pay the compensation to the claimant as directed in the award by the Tribunal. 19. The next question that arises for consideration is whether in the peculiar facts of this case a direction could be issued to the insurance 1 Page 13 company to first satisfy the awarded amount in favour of the claimant and recover the same from the owner of the vehicle (respondent no. 2 herein). 5 20. In National Insurance Co. Ltd. v. Baljit Kaur and others , this

Court in paragraph 21 of the Report (Pg. 8) held as under : “21. The upshot of the aforementioned discussions is that instead and in place of the insurer the owner of the vehicle shall be liable to satisfy the decree. The question, however, would be as to whether keeping in view the fact that the law was not clear so long such a direction would be fair and equitable. We do not think so. We, therefore, clarify the legal position which shall have prospective effect. The Tribunal as also the High Court had proceeded in terms of the decision of this Court in Satpal Singh . The said decision has been overruled only in Asha Rani . We, therefore, are of the opinion that the interest of justice will be subserved if the appellant herein is directed to satisfy the awarded amount in favour of the claimant, if not already satisfied, and recover the same from the owner of the vehicle. For the purpose of such recovery, it would not be necessary for the insurer to file a separate suit but it may initiate a proceeding before the executing court as if the dispute between the insurer and the owner was the subject-matter of determination before the Tribunal and the issue is decided against the owner and in favour of the insurer. We have issued the aforementioned directions having regard to the scope and purport of Section 168 of the Motor Vehicles Act, 1988, in terms whereof, it is not only entitled to determine the amount of claim as put forth by the claimant for recovery thereof from the insurer, owner or driver of the vehicle jointly or severally but also the dispute between the insurer on the one hand and the owner or driver of the vehicle involved in the accident inasmuch as can be resolved by the Tribunal in such a proceeding.” JUDGMENT 21. The above position has been followed by this Court in National 6 Insurance Co. Ltd. v. Challa Bharathamma & Ors. , wherein this Court in paragraph 13 (Pg. 523) observed as under: 5 (2004) 2 SCC 1 6 (2004) 8 SCC 517 1 Page 14

22. In National Insurance Company Limited v. Kaushalaya Devi JUDGMENT 7 and Others . In paragraph 15 of the Report (pg. 250), the Court observed as follows: “15. For the reasons aforementioned, civil appeal arising out of SLP (C) No. 10694 is allowed and civil appeal arising out of SLP (C) No. 9910 of 2006 is dismissed. If the amount deposited by the Insurance Company has since been withdrawn by the first respondent, it would be open to the Insurance Company to recover the same in the manner specified by the High Court. But if the same has not been withdrawn the deposited amount may be refunded to the Insurance Company and the proceedings for realisation of the amount may be initiated against the owner of the 7 (2008) 8 SCC 246 1 Page 15 vehicle. In the facts and circumstances of the case, however, there shall be no order as to costs.” 23. We are informed that by an order dated 19.01.2007 in

5699/2006] in light of the argument raised before a two-Judge Bench that the direction ought not to be issued to the insurance company to discharge the liability under the award first and then recover the same from the owner, the matter has been referred to the larger Bench by the following order: “Having regard to the submissions urged before us, we are of the view that this petition may be placed for consideration before a larger Bench. We notice that in some of the decisions such a direction was made in cases where the compensation had already been paid by the insurer, but there are observations therein which support the view that such a direction can be made in all cases where the owner has insured his vehicle against third party risks. In Baljit Kaur’s case (supra) which is a judgment rendered by three Hon’ble Judges, such a direction was made in the special circumstances noticed by the Court in paragraph 21 of the report. There are observations in Oriental Insurance Co. Ltd. Vs. Ranjit Saikia and Ors. (2002) 9 SCC 390 which may support the contention of the petitioners before us.” JUDGMENT 24. In National Insurance Company Ltd. v. Parvathneni & Another [SLP(C)….CC No. 10993 of 2009], the following two questions have been referred to the larger Bench for consideration: (1) If an Insurance Company can prove that it does not have any liability to pay any amount in law to the claimants under the Motor Vehicles Act or any other enactment, can the Court yet compel it to pay the amount in question giving it liberty to later on recover the same from the owner of the vehicle. 1 Page 16 (2) Can such a direction be given under Article 142 of the Constitution, and what is the scope of Article 142? Does Article 142 permit the Court to create a liability where there is none?”

5 6 Kaur and Challa Bharathamma should not be followed, more so in a peculiar fact situation of this case. In the present case, the accident occurred in 1993. At that time, claimant was 28 years’ old. He is now about 48 years. The claimant was a driver on heavy vehicle and due to the accident he has been rendered permanently disabled. He has not been able to get compensation so far due to stay order passed by this Court. He cannot be compelled to struggle further for recovery of the amount. The insurance company has already deposited the entire awarded amount pursuant to the order of this Court passed on 01.08.2011 and the said amount has been invested in a fixed deposit account. Having regard to JUDGMENT these peculiar facts of the case in hand, we are satisfied that the claimant (Respondent No. 1) may be allowed to withdraw the amount deposited by the insurance company before this Court along-with accrued interest. The insurance company (appellant) thereafter may recover the amount so paid from the owner (Respondent No. 2 herein). The recovery of the amount by the insurance company from the owner shall be made by following the procedure as laid down by this Court in the case of Challa 6 Bharathamma . 1 Page 17 26. Appeal is allowed and disposed of as above with no order as to costs. …………………….J. (R.M. Lodha) ..…………………….J. (Anil R. Dave) NEW DELHI. JANUARY 3, 2013. JUDGMENT 1 Page 18