Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 7009 OF 2008
(Arising out of SLP (C) No.4301 of 2006)
United India Insurance Co. Ltd. … Appellant
Versus
Santro Devi & Ors. … Respondents
J U D G M E N T
S.B. Sinha, J.
1. Leave granted.
2. One Atma Ram Sharma was the owner of a truck bearing registration
No.HIN-4737. It was hypothecated to a Bank. Atma Ram Sharma died
sometime in 1991. The said vehicle was insured with the appellant.
Renewal of the contract of insurance, however, used to be done by the
Bank. Despite the death of the said Atma Ram Sharma, no step was taken
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either by the Bank or by his heirs and legal representatives to get the
registration of the vehicle transferred in their names. The insurance policy
also continued to be renewed in the name of Atma Ram Sharma.
3. The said vehicle met with an accident while being driven by Shri
Chhater Singh on 15.9.1994 in which he died. The legal heirs and
representatives of the said Chhater Singh filed an application for grant of
compensation under Section 4 of the Workmen’s Compensation Act, 1923
against the widow of the deceased Atma Ram Sharma as also the appellant-
Insurance Company claiming a sum of Rs.1,22,400/-.
4. Appellant, having been given notice by the Commissioner of
Workmen Compensation, in its reply, raised the following purported
primary objections :
1. That the para No.1 of the petiion as stated is
wrong hence denied. In fact Shri Atma Ram died
in the year 1991 and on the date of alleged
accident no legal insurance policy was in force. It
is pertinent to say that alleged offending vehicle
No.HIN-4737 was fraudulently got insured vide
policy No.111302/31/16/21/0065/94 on 12.5.1994
by concealing the true facts. Even according to
law the contract cannot be made in favour of dead
person. So under the Indian Contract Act, 1872
the alleged contract of Insurance is not liable to
pay any amount of compensation. The respondent
No.1 was not insured, so as per the terms and
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conditions of the insurance policy, the company is
not bound to indemnify the claim.”
5. The Commissioner, Workmen’s Compensation, having regard to the
pleadings of the parties, framed several issues, issue No.5 whereof reads as
under :
“5. Whether the contract of insurance of the
truck in question between Atma Ram & Co.
is void and not enforceable as alleged. …
OPP.II”
6. From the order of the Commissioner, Workmen Compensation, it
does not appear that any witness was examined on behalf of the appellant.
The learned Commissioner, Workmen Compensation, determined issue
No.5 in favour of the respondent, stating :
“Whether the contract of insurance of the truck in
question between Atma Ram and Co. is void?
RW1 Rati Ram has deposed in his statement that
Shri Atam Ram was the owner of the truck and
after his death his wife is owner of the said truck.
He is general power of attorney of Gumani Devi.
He further deposed that the truck was insured with
United India Insurance Company and copy of
Insurance Cover is Ex.RW1/8. The driver of ill-
fated truck was Chattar Singh who died in truck
accident near Ronhat in year 1994 who was given
Rs.2000/- per day ( sic) . In cross-examination he
admitted that Atma Ram died in 1991 and the
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truck was insured with SBI Kafetta. He denied
that Chattar Singh was gratuitous passenger in the
ill fated truck. Since the truck was insured with
the respondent No.2, therefore, it is the liability of
the Insurance Co. to pay the amount of
compensation. Therefore, this issue is decided in
favour of the petitioners and against the
respondents.”
7. A sum of Rs.1,42,465/- was directed to be paid by way of
compensation. An appeal preferred thereagainst by the appellant herein
under Section 30 of the Workmen Compensation Act has been dismissed by
the High Court relying on or on the basis of the decision of this Court in
Rikhi Ram & Anr. v. Sukhrania (Smt.) & Ors. [(2003) 3 SCC 97], stating :
“It is thus clear that whether intimation is given or
not given to the Insurance Company with regard to
the transfer of a vehicle. The Insurance Company
under the provisions of the Motor Vehicles Act,
1988 is liable to pay compensation. The Insurance
Company at the time when it renewed the policy
of insurance and accepted the premium should
have verified whether Atma Ram was alive or not.
In the present case the premium appears to have
been paid by the bank with which the vehicle was
hypothecated.”
8. Mr. Vishnu Mehra, learned counsel appearing on behalf of the
appellant, would submit that the contract of insurance having been entered
into on or about 13.5.1994 in the name of the deceased Atma Ram Sharma,
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it was void ab initio and in that view of the matter, the appellant had no
statutory or contractual liability to reimburse the owner of the vehicle in
relation thereto.
9. Mr. Attri, learned counsel appearing on behalf of the respondent, on
the other hand, would contend that a certificate of insurance having been
issued by the Insurance Company, it could not have repudiated the claim
having already accepted the amount of premium.
10. The Motor Vehicles Act, 1988 was enacted to consolidate and amend
the law relating to motor vehicles. Chapter XI of the Motor Vehicles Act
provides for insurance of motor vehicles against third party risks.
Section 145 is the definition section, clause (b) whereof defines
‘certificate of insurance’ to mean a certificate issued by an authorized
insurer in pursuance of sub-section (3) of Section 147 and includes a cover
note complying with such requirements as may be prescribed, and where
more than one certificate has been issued in connection with a policy, or
where a copy of a certificate has been issued, all those certificates or that
copy, as the case may be. Clause (d) of Section 145 defines ‘policy of
insurance’ which include a certificate of insurance.
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Section 146 mandates that no person, except as a passenger, shall use
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 the said Chapter. Section 147 provides for the
requirements of policies and limits of liability in the following terms :
“ (a) is issued by a person who is an authorised
insurer; or
(b) insurer 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, including owner of the goods or his
authorised representative carried in the vehicle] or
damage to any property of a third party caused by
or arising out of the use of the vehicle in a public
place;
(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.”
The proviso appended thereto reads as under :
“Provided that a policy shall not be required-
(i) to cover liability in respect of the death, arising
out of and in the course of his employment, of the
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employee of a person insured by the policy or in
respect of bodily injury sustained by such an
employee arising out of and in the course of his
employment other than a liability arising under
the Workmen's Compensation Act, 1923 (8 of
1923) in respect of the death of, or bodily injury
to, any such employee-
(a) engaged in driving the vehicle, or
(b) if it is a public service vehicle engaged as
conductor of the vehicle or in examining tickets
on the vehicle, or
(c) if it is a goods carriage, being carried in the
vehicle, or
(ii) to cover any contractual liability.”
11. The insurer could deny its liability on limited grounds as envisaged
under sub-section (2) of Section 149 of the Act. One of the grounds which
is available to the insurance company for denying its statutory liability is
that the policy is void having been obtained by reason of non-disclosure of a
material fact or by a representation of fact which was false in some material
particular.
12. Indisputably, apart from raising a general and vague plea of fraud, no
particulars thereof had been disclosed. The contract of insurance was
entered into by the Bank with the appellant. The premium was paid by the
bank. The contract of insurance might have been drawn in the name of the
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deceased Atma Ram Sharma but no witness has been examined on behalf of
the appellant alleging that they were not aware thereabout.
13. When questioned, Mr. Mehra, very fairly stated that the insurance
policy was an old one and it was being renewed from year to year. If the
appellant had been renewing the insurance policy on year to year basis on
receipt of a heavy amount of premium with the knowledge that the owner of
the vehicle has expired and the name of his legal heirs and representatives
had not been transferred in the registration book maintained by the
aurhorities under the Motor Vehicles Act, in our opinion, the appellant
cannot be heard to say that it was not bound to satisfy the claim of a third
party.
14. The provisions of compulsory insurance have been framed to advance
a social object. It is in a way part of the social justice doctrine. When a
certificate of insurance is issued, in law, the insurance company is bound to
reimburse the owner. There cannot be any doubt whatsoever that a contract
of insurance must fulfill the statutory requirements of formation of a valid
contract but in case of a third party risk, the question has to be considered
from a different angle.
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15. Section 146 provides for statutory insurance. An insurance is
mandatorily required to be obtained by the person in charge of or in
possession of the vehicle. There is no provision in the Motor Vehicles Act
that unless the name(s) of the heirs of the owner of a vehicle is/are
substituted on the certificate of insurance or in the certificate of registration
in place of the original owner (since deceased), the motor vehicle cannot be
allowed to be used in a public place. Thus, in a case where the owner of a
motor vehicle has expired, although there does not exist any statutory
interdict for the person in possession of the vehicle to ply the same on road;
but there being a statutory injunction that the same cannot be plied unless a
policy of insurance is obtained, we are of the opinion that the contract of
insurance would be enforceable. It would be so in a case of this nature as
for the purpose of renewal of insurance policy only the premium is to be
paid. It is not in dispute that quantum of premium paid for renewal of the
policy is in terms of the provisions of the Insurance Act, 1938.
16. The vehicle was hypothecated to a nationalized bank. The certificate
of registration, presumably, therefore, carried the name of the bank also.
The bank admittedly paid the premium.
17. We, therefore, fail to see any reason as to how the appellant could
avoid its statutory liability. Our attention has been drawn to Section 155 of
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the Motor Vehicles Act by Mr. Mehra to contend that the statutory liability
of the insurance company arises only when the original contract of
insurance was entered into by and between the owner and the insurer and
not in a case of this nature.
18. Section 155 of the Act, in our opinion, cannot be said to have any
application in a situation of this nature. We may notice the provisions of
Section 157 of the Act in terms whereof in a case of transfer of a motor
vehicle, the certificate of insurance and the policy shall be deemed to have
been transferred in favour of the person to whom the motor vehicle is
transferred with effect from the date of its transfer.
19. We have noticed hereinbefore that no witness was examined on
behalf of the appellant. Only a competent officer informed in the matter
could have disclosed as to whether the widow of late Atma Ram Sharma
had signed any document or whether the fact that Atma Ram Sharma had
expired in the year 1991 came to be known to the officers of the appellant
only after the accident had taken place. If despite knowledge of the fact that
Atma Ram Sharma had died in the year 1991, the insurance company, with
its eyes wide open, had been accepting the amount of premium every year
from the widow of the said late Atma Ram Sharma or from the Bank, in our
opinion, a contract by necessary implication, had come into being. Even in
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a case of this nature, the doctrine of ‘acceptance sub silentio’ shall be
applicable.
20. This Court furthermore in some of its decisions noticed the
distinction between a statutory contract of insurance and a contract of
insurance simplicitor. It is in that view of the matter, this Court in Rikhi
Ram (supra), held :
“ 4. A perusal of Sections 94 and 95 would further
show that the said provisions do not make
compulsory insurance to the vehicle or to the
owners. Thus, it is manifest that compulsory
insurance is for the benefit of third parties. The
scheme of the Act shows that an insurance policy
can cover three kinds of risks i.e. owner of the
vehicle, property (vehicle) and third party. The
liability of the owner to have compulsory
insurance is only in regard to the third party and
not to the property. Section 95(5) of the Act runs
as follows:
“95. (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.”
5. The aforesaid provision shows that it was
intended to cover two legal objectives. Firstly, that
no one who was not a party to a contract would
bring an action on a contract; and secondly, that a
person who has no interest in the subject-matter of
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an insurance can claim the benefit of an insurance.
Thus, once the vehicle is insured, the owner as
well as any other person can use the vehicle with
the consent of the owner. Section 94 does not
provide that any person who will use the vehicle
shall insure the vehicle in respect of his separate
use.”
21. We may, furthermore, notice that recently this Court in National
Insurance Co. Ltd. v. Laxmi Narain Dhut [(2007) 3 SCC 700] held as
under :
“ 17. Section 149 is part of Chapter XI which is
titled “Insurance of Motor Vehicles against Third-
Party Risks”. 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.
XXX XXX XXX
23. As noted above, there is no contractual relation
between the third party and the insurer. Because of
the statutory intervention in terms of Section 149,
the same becomes operative in essence and
Section 149 provides complete insulation.
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 licence has to be
considered differently in respect of the third party
and in respect of own damage claims.”
13
Yet again, another Bench of this Court in Oriental Insurance
Company Ltd. v. Meena Variyal & Ors. [(2007) 5 SCC 428], opined :
“12 . Chapter XI of the Act bears a heading,
“Insurance of Motor Vehicles against third-party
risks”. The definition of “third party” is an
inclusive one since Section 145( g ) only indicates
that “third party” includes the Government. It is
Section 146 that makes it obligatory for an
insurance to be taken out before a motor vehicle
could be used on the road. The heading of that
section itself is “Necessity for insurance against
third-party risk”. No doubt, the marginal heading
may not be conclusive. It is Section 147 that sets
out the requirement of policies and limits of
liability. It is provided therein that in order to
comply with the requirements of Chapter XI of the
Act, a policy of insurance must be a policy which
is issued by an authorised insurer; or which
insures the person or classes of persons specified
in the policy to the extent specified in sub-section
(2) against any liability which may be incurred by
the owner in respect of the death of or bodily
injury or damage to any property of a third party
caused by or arising out of the use of the vehicle in
a public place. With effect from 14-11-1994,
injury to the owner of goods or his authorised
representative carried in the vehicle was also
added. The policy had to cover 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. Then, as per the proviso, the policy
shall not be required to cover liability in respect of
the death, arising out of and in the course of his
employment, of the employee of a person insured
by the policy or in respect of bodily injury
sustained by such an employee arising out of and
in the course of his employment, other than a
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liability arising under the Workmen’s
Compensation Act, 1923 in respect of the death of,
or bodily injury to, an employee engaged in
driving the vehicle, or who is a conductor, if it is a
public service vehicle or an employee being
carried in a goods vehicle or to cover any
contractual liability. Sub-section (2) only sets
down the limits of the policy.
13 . As we understand Section 147(1) of the Act,
an insurance policy thereunder need not cover the
liability in respect of death or injury arising out of
and in the course of the employment of an
employee of the person insured by the policy,
unless it be a liability arising under the
Workmen’s Compensation Act, 1923 in respect of
a driver, also the conductor, in the case of a public
service vehicle, and the one carried in the vehicle
as owner of the goods or his representative, if it is
a goods vehicle. It is provided that the policy also
shall not be required to cover any contractual
liability. Uninfluenced by authorities, we find no
difficulty in understanding this provision as one
providing that the policy must insure an owner
against any liability to a third party caused by or
arising out of the use of the vehicle in a public
place, and against death or bodily injury to any
passenger of a public service vehicle caused by or
arising out of the use of vehicle in a public place.
The proviso clarifies that the policy shall not be
required to cover an employee of the insured in
respect of bodily injury or death arising out of and
in the course of his employment. Then, an
exception is provided to the last foregoing to the
effect that the policy must cover a liability arising
under the Workmen’s Compensation Act, 1923 in
respect of the death or bodily injury to an
employee who is engaged in driving the vehicle or
who serves as a conductor in a public service
vehicle or an employee who travels in the vehicle
of the employer carrying goods if it is a goods
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carriage. Section 149(1), which casts an obligation
on an insurer to satisfy an award, also speaks only
of award in respect of 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). This provision
cannot therefore be used to enlarge the liability if
it does not exist in terms of Section 147 of the Act.
14 . The object of the insistence on insurance under
Chapter XI of the Act thus seems to be to
compulsorily cover the liability relating to their
person or properties of third parties and in respect
of employees of the insured employer, the liability
that may arise under the Workmen’s
Compensation Act, 1923 in respect of the driver,
the conductor and the one carried in a goods
vehicle carrying goods.”
22. We are not oblivious of a decision of this Court in Deddappa & Ors.
V. Branch Manager, National Insurance Co. Ltd. [(2008) 2 SCC 595],
wherein this Court, having regard to the fact situation obtaining therein,
opined :
“ 20. A contract is based on reciprocal promise.
Reciprocal promises by the parties are condition
precedents for a valid contract. A contract
furthermore must be for consideration.”
In this case, the statute itself takes care of validity of the contract. It
is mandatory. Once a valid contract is entered into, only because of a
mistake or otherwise, the name of the original owner has not been
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mentioned in the certificate of registration and/or the documents of
hypothecation of the vehicle with the bank had still been continuing in his
name, it cannot be said that the contract itself is void unless it was shown
that in obtaining the said contract a fraud had been practised. Not only the
particulars of fraud had not been pleaded, but even no witness was
examined on behalf of the appellant. It cannot, thus, be said that a case of
fraud in the matter of entering into the contract of insurance had been made
out by the appellant.
23. For the reasons aforementioned, there is no infirmity in the impugned
judgment. The appeal is dismissed accordingly with costs. Counsel’s fee
assessed at Rs.25,000/-.
……………………………….J.
[S.B. Sinha]
..…………………………..…J.
[Cyriac Joseph]
New Delhi;
December 02, 2008