Gurmeet Singh vs. 1.The New India Assurance Company Ltd. & Ors.

* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: 22.08.2023

Pronounced on: 06.10.2023


+ MAC.APP. 288/2021 & CM APPLs.39915/2021, 39917/2021

GURMEET SINGH ..... Appellant
Through: Mr.Rachit Mittal, Ms.Megha
Tyagi, Mr.Parish Mishra,
Mr.Adarsh Srivastava, Advs.
versus

THE NEW INDIA ASSURANCE COMPANY LTD. & ORS.
..... Respondents
Through: Mr.Salil Paul, Mr.Sahil Paul,
Mr.Mayank Jain, Advs. for R-1




CORAM:
HON'BLE MR. JUSTICE NAVIN CHAWLA
J U D G M E N T
1. This appeal has been filed by the appellant challenging the
Award dated 01.03.2018 (hereinafter referred to as the „Impugned
Award‟) passed by the learned Motor Accidents Claims Tribunal,
Rohini, Delhi (hereinafter referred to as the „Tribunal‟) in MAC
Petition No.504961/2016, titled Smt. Rubi Devi & Ors. v. Megh
Singh & Ors. .
2. The limited challenge of the appellant against the Impugned
Award is on the liberty granted by the learned Tribunal to the
respondent no.1 herein, that is the Insurance Company, to recover the
compensation paid by it to the claimants, that is the respondent nos.2
to 5 herein, from the appellant, who is the owner of the offending
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vehicle. The learned Tribunal has granted the recovery right to the
respondent no. 1 on the ground that the appellant, as on the date of the
accident, did not have a Permit for plying the offending vehicle, that is
the Truck bearing registration no.HR-38F-3387, within the State of
Delhi.
Submissions of the learned counsel for the Appellant:
3. The learned counsel for the appellant, placing reliance on the
judgment of the Supreme Court in National Insurance Co. Ltd. v.
Swaran Singh and Others , (2004) 3 SCC 297, submits that the
respondent no.1 can escape its liability under the Insurance Policy
only where it can prove that there is a breach of the condition(s) of the
policy as stipulated in Section 149(2)(a)(i) or Section 149(2)(a)(ii) of
the Motor Vehicles Act, 1988 (hereinafter referred to as the „Act‟).
4. He submits that Section 149(2)(a)(i)(c) of the Act states that
only where the vehicle is being used for a purpose not allowed by the
Permit, that the respondent no.1 can avoid its liability under the
Insurance Policy and can seek recovery of the compensation paid from
the appellant. He submits that mere plying of the Offending Vehicle at
a place beyond the route for which the Permit has been granted is not
a fundamental breach of the conditions of policy for which the insured
can claim a right to recover the compensation paid to the claimants
from the owner/insured. In support, he places reliance on the judgment
of this Court in Delhi Transport Corporation & Ors. v. National
Insurance Co. Ltd. & Anr. 2012 SCC OnLine Del 2285; the judgment
of the Full Bench of High Court of Kerela in Augustine, V.M. v.
Ayyapankutty and Ors., 2015 SCC OnLine Ker 14898; of the High
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Court of the Punjab & Haryana in National Insurance Co. Ltd. v.
Paramjit Kaur and Others , 2016 SCC OnLine P&H 11190, and in
ICICI Lombard General Motor Insurance Company Ltd. v. Vijaya
Chhabra and Others, 2016 SCC OnLine P&H 7973; and of the High
Court of Karnataka in Ujwala Prasad v. New India Assurance
th
Company Ltd., 2020 SCC OnLine Kar 1915, and judgment dated 27
July, 2021 in MFA No. 5960 of 2015, titled Smt.Rehanna Begum v.
The Branch Manager, New India Assurance Company .

Submissions of the learned counsel for the respondent no. 1:
5. On the other hand, the learned counsel for the respondent no.1
places reliance on the judgment of the Supreme Court in Amrit Paul
Singh and Another v. Tata AIG General Insurance Company
Limited and Others (2018) 7 SCC 558, to submit that it is no longer
res integra that where a vehicle is being used at a public place without
a Permit, the Insurance Company shall have a right to recover the
compensation paid to the claimants from the owner of the vehicle. He
submits that in the present case, the vehicle was being admittedly
plied in Delhi without a Permit and therefore, the respondent no.1 has
rightly been granted a right to recover the compensation paid to the
respondent nos.2 to 5 from the appellant herein.

Submissions of Mr. Ankit Virmani, learned Amicus Curiae:
6. While the present judgment was in preparation, another appeal,
being MAC Appeal No.21 of 2016, titled IIFCO Tokio General
Insurance Co. Ltd. v. Asha & Ors. , was listed before this Court. In
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the said appeal, the same issue had been raised and this Court had
appointed Mr.Ankit Virmani, learned Advocate, as an Amicus Curiae.
This Court, therefore, requested Mr.Virmani to file a brief synopsis of
his submissions on the above issue.
7. Mr.Virmani has submitted that the High Court of Rajasthan in
R.K. College v. Ramesh Chand & Ors., 2007 SCC OnLine Raj 393;
and the Punjab & Haryana High Court in Mani Ram Aggarwal
(deceased) through his LRs v. United India Insurance Co. Ltd. &
Ors. , 2016 SCC OnLine P&H 7144, have held that plying of a vehicle
beyond the route for which the Permit has been granted is not a
violation of the purpose for which the Permit has been granted and,
therefore, does not constitute a valid defence available to the
Insurance Company under Section 149(2)(i)(c) of the Act.
8. He submits that on the other hand, the Supreme Court in Rani
and Others. v. National Insurance Company Limited and Others.,
(2018) 8 SCC 492; and High Court of Madras in Oriental Insurance
Co. Ltd. v. Krishnan and Another, 2023 SCC OnLine Mad 2935,
have held that in such circumstances, the Insurance Company would
have a right to recover the compensation paid to the claimants from
the owner of the offending vehicle.
9. He submits that the High Court of Madhya Pradesh in Ram
Sujan Tiwari v. Sita Gupta and others, 2007 SCC OnLine MP 567;
and the High Court of Himachal Pradesh in M/s. Yash Construction
Company v. National Insurance Co. Ltd. & others 2018 SCC OnLine
HP 598, has held that, in fact, the Insurance Company is absolved of
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its liability to pay compensation where the vehicle was being driven
on the route for which the permit was not granted.

Analysis and Findings:
10. I have considered the submissions made by the learned counsels
for the parties and the learned Amicus Curiae.
11. From the above, it is evident that the issue to be determined by
this Court is “whether the Insurance Company is entitled to a right to
recover the compensation paid to the claimants arising out of a motor
vehicular accident from the owner of the motor vehicle involved in
such accident, where the accident occurs at a place which is beyond
the route for which the vehicle has been granted a Permit under
Section 66 of the Act?”
12. At the outset, it is essential to the point out that the Insurance
Policy issued by the respondent no. 1 in favour of the appellant, has an
explicit clause as under:
“ Limitations as to use
The Policy covers use only under a permit
within the meaning of the Motor Vehicles Act,
1988 or such a carriage falling under Sub-
section 3 of Section 66 of the Motor Vehicles
Act, 1988. The Policy does not cover use FOR
a) Organised racing b) Pace Making c)
Reliability Trials d) Speed Testing. ”

13. Therefore, it is a condition of Policy that the vehicle must be
used only under a Permit.
14. In answering the above issue, some of the provisions of the Act
also would be relevant to be considered. As the accident had occurred
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on 26.11.2014, the provisions of the Act, as were then applicable, are
being considered hereunder.
15. Section 149 of the Act casts a duty on the Insurance Company
to satisfy a judgment and Award against the persons insured in respect
to the third-party risks. Section 149 (2) of the Act entitles the
Insurance Company to defend the claim inter-alia on the ground that
there has been a breach of a condition of the policy, inasmuch as the
transport vehicle was being used for a purpose not allowed by the
Permit under which the vehicle is used. Section 149 of the Act, insofar
as it is relevant to the present appeal, is reproduced herein below:
“ 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 163A is obtained against any person
insured by the policy, then, notwithstanding
that the insurer may be entitled to avoid or
cancel or may have avoided or cancelled the
policy, the insurer shall, subject to the
provisions of this section, pay to the person
entitled to the benefit of the decree any sum
not exceeding the sum assured payable
thereunder, as if he were the judgment debtor,
in respect of the liability, together with any
amount payable in respect of costs and any
sum payable in respect of interest on that sum
by virtue of any enactment relating to interest
on judgments.

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(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 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 organised 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
disqualification; or
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(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.

xxxx
(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 conditions other than those
in clause (b) of sub-section (2) shall, as
respects such liabilities as are required to be
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 be entitled
to recover the excess from that person.
xxxx

(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
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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.
xxxxx”

16. The above provision, in relation to the cases where the
offending vehicle is found to be driven by a person without a driving
licence or by a person having a fake and invalid driving licence, was
considered by the Supreme Court in Swaran Singh (supra), and it was
held as under:
“ Summary of findings
110. The summary of our findings to the
various issues as raised in these petitions is 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
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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.

(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 wherefor 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.

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(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 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. 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
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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.”

17. As far as the „Permit‟ is concerned, Section 2(31) of the Act
defines a Permit as under:
“ 2. Definitions. —In this Act, unless the
context otherwise requires,—
xxx
(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;”

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18. Section 66 of the Act states that no owner of a motor vehicle
shall use or permit the use of the vehicle as a transport vehicle in a
public place save in accordance with the permission of a Permit
granted by a Regional or State Transport Authority authorising him to
use the vehicle “in that place” in the manner in which the vehicle is
being used. Sub-Section 3 of the Section 66 gives exemption to certain
vehicles for being used without a permit. Section 66(1) of the Act, so
far as it is relevant to the present appeal, is reproduced herein below:

“ 66. Necessity for permits.— (1) No 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 authorising him the use of the
vehicle in that place in the manner in which
the vehicle is being used:
xxxx
Provided also that a goods carriage permit
shall, subject to any conditions that may be
specified in the permit, authorise the holder to
use of the vehicle for the carriage of goods for
or in connection with a trade or business
carried on by him.
xxxx”

19. Section 69 of the Act states that every application for a Permit
shall be made to the Regional Transport Authority of the region in
which the vehicle is proposed to be used. The same is reproduced
herein below:
“ 69. General provision as to applications for
permits. —(1) Every application for a permit
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shall be made to the Regional Transport
Authority of the region in which it is proposed
to use the vehicle or vehicles:

Provided that if it is proposed to use the
vehicle or vehicles in two or more regions
lying within the same State, the application
shall be made to the Regional Transport
Authority of the region in which the major
portion of the proposed route or area lies, and
in case the portion of the proposed route or
area in each of the regions is approximately
equal, to the Regional Transport Authority of
the region in which it is proposed to keep the
vehicle or vehicles:

Provided further that if it is proposed to use
the vehicle or vehicles in two or more regions
lying in different States, the application shall
be made to the Regional Transport Authority
of the region in which the applicant resides or
has his principal place of business.

(2) Notwithstanding anything contained in
sub-section (1), the State Government may, by
notification in the Official Gazette, direct that
in the case of any vehicle or vehicles proposed
to be used in two or more regions lying in
different States, the application under that
sub-section shall be made to the State
Transport Authority of the region in which the
applicant resides or has his principal place of
business.”

20. Section 77 of the Act prescribes the particulars which must be
given on an application for a Permit to use a motor vehicle for carriage
of goods. The same inter-alia includes “area or the route or routes to
which the application relates”.
21. Section 79 of the Act states that a Regional Transport Authority
may grant a Goods Carriage Permit to be valid throughout the State or
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in accordance with the application, and attach to the Permit a
condition that the vehicle shall be used only in a specified area or on a
specified route or routes. Section 79 of the Act, so far as is relevant to
the present appeal, is reproduced herein below:
“ 79. Grant of goods carriage permit .—(1) A
Regional Transport Authority may, on an
application made to it under section 77, grant
a goods carriage permit to be valid throughout
the State or in accordance with the application
or with such modifications as it deems fit or
refuse to grant such a permit:

Provided that no such permit shall be granted
in respect of any area or route not specified in
the application.

(2) The Regional Transport Authority, if it
decides to grant a goods carriage permit, may
grant the permit and may, subject to any rules
that may be made under this Act, attach to the
permit any one or more of the following
conditions, namely:—
(i) that the vehicle shall be used only in a
specified area or on a specified route or
routes;
xxxx”

22. Section 80(3) of the Act states that an application to vary the
conditions of any Permit by inclusion of new route or routes or a new
area shall be treated as an application for grant of a new Permit. The
same is reproduced herein below:
“ 80. Procedure in applying for and granting
permits. —
xxx
(3) An application to vary the conditions of
any permit, other than a temporary permit, by
the inclusion of a new route or routes or a new
area or by altering the route or routes or area
covered by it, or in the case of a stage
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carriage permit by increasing the number of
trips above the specified maximum or by the
variation, extension or curtailment of the route
or routes or the area specified in the permit
shall be treated as an application for the grant
of a new permit:

Provided that it shall not be necessary so to
treat an application made by the holder of
stage carriage permit who provides the only
service on any route to increase the frequency
of the service so provided without any increase
in the number of vehicles:

Provided further that,—
(i) in the case of variation, the termini
shall not be altered and the distance
covered by the variation shall not
exceed twenty-four kilometres;
(ii) in the case of extension, the distance
covered by extension shall not exceed
twenty-four kilometres from the termini,
and any such variation or extension within
such limits shall be made only after the
transport authority is satisfied that such
variation will serve the convenience of the
public and that it is not expedient to grant a
separate permit in respect of the original route
as so varied or extended or any part thereof.
xxxx”

23. Section 86 of the Act authorises the Regional Transport
Authority which granted the Permit to cancel the Permit or suspend it
for the reasons stipulated therein, inter-alia including breach of any of
the conditions contained in the Permit.
24. Section 88 of the Act prescribes the necessity and the procedure
for validation of a Permit for use of the vehicle in region other than
the one for which it was granted. Section 88 of the Act is reproduced
herein below:
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“ 88. Validation of permits for use outside
region in which granted. —(1) Except as may
be otherwise prescribed, a permit granted by
the Regional Transport Authority of any one
region shall not be valid in any other region,
unless the permit has been countersigned by
the Regional Transport Authority of that other
region, and a permit granted in any one State
shall not be valid in any other State unless
countersigned by the State Transport Authority
of that other State or by the Regional
Transport Authority concerned:

Provided that a goods carriage permit,
granted by the Regional Transport Authority
of any one region, for any area in any other
region or regions within the same State shall
be valid in that area without the counter-
signature of the Regional Transport Authority
of the other region or of each of the other
regions concerned:

Provided further that where both the starting
point and the terminal point of a route are
situate within the same State, but part of such
route lies in any other State and the length of
such part does not exceed sixteen kilometres,
the permit shall be valid in the other State in
respect of that part of the route which is
in that other State notwithstanding that such
permit has not been countersigned by the State
Transport authority or the Regional Transport
Authority of that other State:

xxxx
(2) Notwithstanding anything contained in
sub-section (1), a permit granted or
countersigned by a State Transport Authority
shall be valid in the whole State or in such
regions within the State as may be specified in
the permit.
(3) A Regional Transport Authority when
countersigning the permit may attach to the
permit any condition which it might have
imposed if it had granted the permit and may
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likewise vary any condition attached to the
permit by the authority by which the permit
was granted.
(4) The provisions of this Chapter relating to
the grant, revocation and suspension of
permits shall apply to the grant, revocation
and suspension of countersignatures of
permits:

Provided that it shall not be necessary to
follow the procedure laid down in section 80
for the grant of countersignatures of permits,
where the permits granted in any one State are
required to be countersigned by the State
Transport Authority of another State or by the
Regional Transport Authority concerned as a
result of any agreement arrived at between the
States after complying with the requirements
of sub-section (5).
xxxx
(7) Notwithstanding anything contained in
sub-section (1), a Regional Transport
Authority of one region may issue a temporary
permit under section 87 to be valid in another
region or State with the concurrence, given
generally or for the particular occasion, of the
Regional Transport Authority of that other
region or of the State Transport Authority of
that other State, as the case may be.
xxxx

Explanation.—In this section,—
xxxx
(c) “national permit” means a permit granted
by the appropriate authority to goods
carriages to operate throughout the territory
of India or in such contiguous States, not
being less than four in number, including the
State in which the permit is issued as may be
specified in such permit in accordance with
the choice indicated in the application.”
(Emphasis Supplied)

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25. A reading of the above provisions would show that a Permit is
granted in relation to a particular route/area/region. The
route/area/region is, therefore, a prime consideration and an essential
condition of a Permit. The same is sacrosanct, functional, and
fundamental, with various provisions of the Act emphasising on the
same. Driving of the offending vehicle in an area or on a route which
is not permitted by a Permit would, therefore, amount to driving the
motor vehicle without a valid Permit and shall be a fundamental
breach of the conditions of an insurance policy.
26. In National Insurance Co. Ltd. v. Challa Upendra Rao and
others, (2004) 8 SCC 517, the Supreme Court, considering the
mandate of Section 66 of the Act, held that where a person is found to
be driving a transport vehicle without a Permit, the defence under
Section 149(2) of the Act shall be available to the insurer, however,
the insurer would have to satisfy the Award and then seek recovery of
the compensation amount from the insured/owner of the offending
vehicle. I may quote from the judgment as under:
“ 12. The High Court was of the view that since
there was no permit, the question of violation
of any condition thereof does not arise. The
view is clearly fallacious. A person without
permit to ply a vehicle cannot be placed on a
better pedestal vis-à-vis one who has a permit,
but has violated any condition thereof. Plying
of a vehicle without a permit is an infraction.
Therefore, in terms of Section 149(2) defence
is available to the insurer on that aspect. The
acceptability of the stand is a matter of
adjudication. The question of policy being
operative had no relevance for the issue
regarding liability of the insurer. The High
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Court was, therefore, not justified in holding
the insurer liable.

13. The residual question is what would be the
appropriate direction. Considering the
beneficial object of the Act, it would be proper
for the insurer to satisfy the award, though in
law it has no liability. In some cases the
insurer has been given the option and liberty
to recover the amount from the insured. For
the purpose of recovering the amount paid
from the owner, the insurer shall not be
required to file a suit. It may initiate a
proceeding before the executing court
concerned 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. Before release of the
amount to the claimants, owner of the
offending vehicle shall furnish security for the
entire amount which the insurer will pay to the
claimants. The offending vehicle shall be
attached, as a part of the security. If necessity
arises the executing court shall take assistance
of the Regional Transport Authority
concerned. The executing court shall pass
appropriate orders in accordance with law as
to the manner in which the owner of the
vehicle shall make payment to the insurer. In
case there is any default it shall be open to the
executing court to direct realisation by
disposal of the securities to be furnished or
from any other property or properties of the
owner of the vehicle i.e. the insured. In the
instant case, considering the quantum
involved, we leave it to the discretion of the
insurer to decide whether it would take steps
for recovery of the amount from the insured.”
(Emphasis supplied)

27. In Amrit Paul Singh (supra), the Supreme Court reiterated that
where the vehicle is being used in a public space without a Permit, it
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is a fundamental statutory infraction and the insured would be liable to
reimburse the compensation amount paid to the claimants by the
Insurance Company. I may quote from the judgment as under:
“24. 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 National Insurance
Co. Ltd. v. Swaran Singh, (2004) 3 SCC 297
and Lakhmi Chand v. Reliance General
Insurance, (2016) 3 SCC 10 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
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 that the insurer
was required to pay the compensation amount
to the claimants with interest with the
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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 Swaran Singh
(supra) and other cases pertaining to pay and
recover principle.”

28. In Rani & Ors. (supra), the Supreme Court was considering an
appeal against the judgment passed by the High Court of Karnataka
against the Award passed by the learned Motor Accidents Claims
Tribunal, which had, while awarding compensation in favour of the
claimants therein, made the Insurance Company jointly and severely
liable to pay the compensation to the claimants. The Award had been
challenged by the Insurance Company contending that the liability to
pay the compensation could not have been fastened on it as the
offending vehicle did not possess a valid Permit to operate in the State
of Karnataka and that the Permit was granted for the State of
Maharashtra alone. The High Court of Karnataka held that the liability
to pay the compensation was only that of the owner of the offending
vehicle. The Supreme Court, however, held that the Insurance
Company should first pay the compensation amount to the respective
claimants and shall have the liberty to recover the same from the
owner of the offending vehicle.
29. Recently and more explicitly, the Supreme Court in Gohar
Mohammed. v. Uttar Pradesh State Road Transport Corporation
and Others, (2023) 4 SCC 381 has held that even assuming that there
was a valid and effective Permit to ply the offending vehicle, the same
was not valid for the place where the accident took place, therefore,
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the liability to pay the compensation is to be that of the owner of the
offending vehicle. I may quote from the judgment as under:
“8. Having heard the learned counsel for the
parties and on perusal of the material
available on record, it clearly reveals that on
the date of accident, the appellant did not have
a valid and effective permit to ply the
offending vehicle on the route where accident
took place. Having extensively gone through
the fact-finding exercise, it is categorically
recorded by MACT that the appellant was
neither able to produce/prove the original
permit nor was able to prove the information
received under the RTI Act. Even if RTI
information is considered by which it is not
clear as to when the disputed permit was
issued and by whom. The alleged permit was
issued on 28-7-2012 i.e. on Saturday and no
explanation is on record as to why deposit of
fee was asked on the next day i.e. Sunday.
Moreover, assuming that permit was valid as
per letter of the Transport Authority, but it is
not of any help to the appellant since the
vehicle was being plied on a route different
than specified in permit. The appellant has
failed to give any explanation to refute the
observations made by MACT to ply the vehicle
on Roorkee bypass to Haridwar via Meerut
which did not fall within the route of permit
issued by the Transport Authority. The said
findings of fact have been affirmed by the High
Court by the impugned order.”
(Emphasis supplied)

30. From the above judgments, it would be apparent that where a
person is found driving a vehicle beyond the route or area or region
for which the Permit has been granted, it would be a case of driving
the offending vehicle without a valid Permit.
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31. I must herein, however, also take note of the judgment of the
Supreme Court in M.S. Middle High School v. HDFC Ergo General
Insurance Co. Ltd. & Ors., 2017 SCC OnLine SC 1845, by which it
dismissed an appeal challenging the order passed by the High Court of
Punjab & Haryana, while observing as under:
“3. The High court rightly held that once there
is breach of condition of policy, the liability
cannot be fastened on the insurer. The High
Court had relied upon decisions of this Court
in National Insurance Company Limited v.
Challa Bharathamma, (2004) 8 SCC 517, New
India Assurance Company Limited v. Asha
Rani, (2003) 2 SCC 223 and National
Insurance Company Limited v. Nicolleta
Rohtagi, (2002) 7 SCC 456.

4. The contrary view in Augustine, V.M. v.
Ayyappankutty, 2015 (1) TN MAC 740 (FB)
(Ker.) cannot thus be held to be valid and is
disapproved to the extent holding that insurer
was liable even if there was breach of
conditions of policy.”
(Emphasis Supplied)

32. In the judgment of the Punjab & Haryana High Court in M.S.
Middle High School & Anr. v. Usha and Ors., 2017 SCC OnLine
P&H 6077, the High Court was considering a case where the vehicle
was being driven without a Permit as its earlier Permit had expired.
The High Court upheld the decision of the learned Motor Accident
Claims Tribunal therein which had granted a right to the Insurance
Company to recover the compensation to the claimants therein from
the owner of the offending vehicle. While upholding the same,
however, the High Court had also observed as under:
“13. Reliance upon Single Bench judgments in
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M/s Yadwindra Public School and Green
Wood Public Senior Secondary School's case
(supra) is also misplaced as these judgments
pertain to route permit and not a permit. A
school bus (transport vehicle) may not require
a route permit but it requires a permit in
compliance with the provisions of Section 66
of the Act. There is no dispute that
nonpossessing of a route permit or deviation
from a route permit may not constitute a valid
defence in favour of the insurance company
under Section 149 (2) of the Act, therefore, any
judgment dealing with route permit would not
come to rescue of the appellants to find fault
with findings of the Tribunal that the insured
did not possess a permit to ply the bus in
question at public place, constituting a valid
defence in favour of the insurance company,
thus, entitling the insurance company to claim
exoneration from its liability even though it
has been fastened with liability to satisfy the
third party claim.”
(Emphasis supplied)

33. The above observation of the High Court, however, in view of
the subsequent judgments of the Supreme Court as referred
hereinabove, can no longer be stated to be good law.
34. Similarly, the judgment of the Full Bench of the Kerala High
Court in Augustine (supra) is no longer a good law, having been
expressly disapproved of by the Supreme Court in M.S. Middle High
School (supra).
35. The judgment of the High Court of Karnataka in Ujwala Prasad
(supra) and Smt. Rehanna Begum (supra) also cannot be considered
as good law in view of the subsequent judgment of the Full Bench of
the High Court of Karnataka in New India Assurance Co. Ltd. v.
Yallavva & Anr., 2020 SCC OnLine Kar 1660, wherein Justice B.V.
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Nagarathna in her concurring opinion, has inter alia observed as
under:

“ Nature and Character of Insurance Policies
under the Act:

26. Having adverted to the statutory
requirements of a policy of insurance, it would
be necessary to discuss the nature and
characteristics of a contract of insurance. It is
well known that the contract of insurance is a
contract of indemnity. It is a promise made by
an insurer to indemnify the insured subject to
certain terms and conditions which may be in
the nature of exemptions or exceptions under
the policy. Mandatory terms of insurance
policy have been delineated under Section
147. They are statutory terms. Section 149(2)
of the Act are termed as defences by an
insurer, or the exemptions to liability of the
insurer to satisfy an award which otherwise an
insurer would be liable to satisfy. Thus, the
conditions of the policy assume importance in
the context of breach of the terms of policy.
The conditions of policy could be either
express or implied. Implied terms are, inter
alia, the statutory terms which have to be
complied with by the insured under every
policy irrespective of whether there is an
express inclusion or reference to them in the
contract. But, express conditions are those
which are expressly set out in the policy on a
consensus ad idem between the insured and
the insurer. The conditions of a policy can
again be categorized into two classes: general
terms and special terms. General Terms are
those which are common to all policies of a
particular nature or class. Special Terms are
those, which are applicable to a particular
policy and by a specific contract between the
insurer and the insured. An insurance policy
would consist of conditions which can again
be categorised into two types : statutory and
contractual. Further, the coverage of risks
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could also be statutory and contractual in
nature or an amalgamation of both types.
Under Section 147(1) of the Act, the coverage
of risks under an insurance policy are
statutory and compulsory in nature. It is
always open to an insurer to cover other risks,
which are optional or contractual, but under
Section 147(1) it is compulsory coverage of
the risks of classes of persons enumerated
therein.

27. Just as an insurance policy could cover
risks which are statutory or contractual in
nature, in the same manner, the exemptions or
restrictions under a policy could also be
statutory or contractual in nature, however,
subject to any supervening statutory
conditions under the Act. For instance, the
grounds of defence which are enumerated in
Section 149(2) of the Act are meant for
avoidance of liability. However, the said
provision is subject to sub-Sections (3), (4)
and (7) of Section 149. They are reiterated as
under for immediate reference:

(a) there has been a breach of a specified
condition of policy, being one of the
following, namely-

(i) A condition excluding the use of
the vehicle-

(A) for hire or reward, where the
vehicle is not covered by a permit
to ply for hire or reward on the
date of the contract of insurance,
or

(B) for organised 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
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(D) without side car being
attached where the vehicle is
MotorCycle; 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
disqualification; 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.

28. The defences available under the statute
alone can be taken by the insurer and none
other as against third parties. Thus under
Section 149(2)(a) and (b) specified defences of
an insurer who is issued notice of a claim to
defend an action are enumerated. If the
insurer succeeds in his defence whether the
third party victim has to execute the decree
against the insured only or the third party
victim is protected by the statute is the
conundrum in this case.
xxxx
30. Thus, between the insured and the insurer,
all restrictions by virtue of the terms,
exceptions and conditions in the policy are
valid and enforceable because they are parties
to the contract. But as against a third party,
only those defences incorporated in the Act
which comes within Section 149(2)(a) could be
raised as regards coverage of compulsory
risks. This is as per Section 149(4). That
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means a third party's rights against the insurer
cannot be defeated by any defence other than
those coming within Section 149(2)(a). The
insurer must in such a case satisfy the decree
in favour of the third party, but can recover it
from the insured by virtue of the proviso to
Section 149(4). Further, Section 149(5) also
empowers the insurer to recover from the
insured any amount paid to the third party, in
respect of a compulsory risk, which is in
excess of the amount insured was liable to pay
under the policy. Thus, Section 149(4) clearly
enunciates the rule of pay and recover under
two circumstances. Proviso to sub-Section (4)
of Section 149 categorically states that any
sum paid by the insurer towards the discharge
of any liability of any person which is covered
by the policy shall be recoverable by that
person. Thus, reference is to Section 149(2)(a)
of the Act. But, as regards Clause (b) of sub-
Section (2) of Section 149, would the principle
of pay and recover apply on a plain reading of
the sub-section? Thus, whether liability
covered by the terms of the policy could be
avoided by the specific defence which is
enumerated under Section 149(2)(b) of the
Act?

xxxx
37. Thus, what follows is that, in regard to
third party rights, the insurer can defeat such
rights under Section 149(2)(a) by proving a
breach of the condition of the policy and
further, proving that the same is a fundamental
breach. In such an event, the insurer can only
mitigate its liability and the insured would be
liable to satisfy the judgment vis-a-vis the
insurer who would have satisfied the claim of
the third party in the first instance. Therefore,
the insurer cannot defeat a third party claim
by any exclusion in the policy having regard to
the four corners of Section 149(2)(a). It can
only mitigate its liability by seeking recovery
from the insured on proof of the exclusion
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(Emphasis Supplied)

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36. In view of the above, I need not discuss the other judgments of
the High Courts, including of this Court, that have been cited by the
learned counsel for the appellant in challenge to the Impugned Award
and by the learned Amicus Curiae.
37. It is, therefore, held that non-possession of a valid and effective
Permit shall entitle the Insurance Company to seek a right to recover
the compensation paid to the claimants from the owner of the
offending vehicle. Such a right will also be available to the Insurance
Company where the offending vehicle is being operated at the time of
the accident at a place for which it does not have a valid Permit.
38. In the present case, the offending vehicle had a valid Permit for
plying only in the State of Uttar Pradesh. There was no Permit for the
offending vehicle to be driven in Delhi, where the accident took place.
This would, therefore, be a case of the offending vehicle being driven
without a valid Permit at the time of the accident. The learned
Tribunal has, therefore, rightly granted a right to the respondent no.3
herein to recover the compensation amount paid to the claimants, that
is, respondent nos.2 to 5, from the appellant.
39. In view of the above, I find no infirmity in the Impugned
Award.
40. The appeal is, accordingly, dismissed along with the pending
applications. There shall be no order as to costs.
41. The statutory amount deposited by the appellant shall be
returned to the respondent no.1 along with interest accrued thereon in
partial discharge of liability of the appellant under the Impugned
Award.
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42. This Court expresses its gratitude to the learned Amicus Curiae
for his assistance.


NAVIN CHAWLA, J.
OCTOBER 06, 2023/Arya/RP/AS

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