ITEM NO.46               COURT NO.9             SECTION XIIA

           S U P R E M E   C O U R T   O F   I N D I A                          RECORD OF PROCEEDINGS                      Petition(s) for Special Leave to Appeal (Civil)....../2009                                                CC 10993/2009

(From  the  judgement  and  order  dated  12/12/2008  in   MACMA  No.  1211/2007  of The HIGH COURT OF A.P  AT HYDERABAD)

NATIONAL INSURANCE CO.LTD.                        Petitioner(s)

                VERSUS

PARVATHNENI & ANR.                                Respondent(s)

With IA 1 (c/delay in filing SLP)

Date: 31/08/2009  This Petition was called on for hearing today.

CORAM :         HON'BLE MR. JUSTICE MARKANDEY KATJU         HON'BLE MR. JUSTICE ASOK KUMAR GANGULY

For Petitioner(s) Mr. S.L.Gupta, Adv.for                      Mr. Goodwill Indeevar,Adv.

Mr. P.K.Singh, Adv.

For Respondent(s)            UPON hearing counsel the Court made the following                                O R D E R  

Delay  of  65  days  in  filing  the  Special  Leave  

Petition is condoned.

Issue notice.

Until further orders, the operation of the impugned  

order shall remain stayed.

In  this  case,  the  allegation  of  the  petitioner-

Insurance  Company  is  that  there  was  no  valid  insurance  

coverage on the date of the accident i.e. 30th November,

2003.  The cheque towards premium for renewal of the policy  

was issued on 29th November, 2003 but the same was  

-2-

dishonoured.   Hence,  the  contention  of  the  Insurance  

Company is that it has no liability to pay any compensation  

amount  to  the  claimants  since  there  was  no  insurance  

coverage on the date of the accident.

Despite  this,  the  High  Court  has  directed  the  

insurance  company  to  pay  the  compensation  amount  to  the  

claimants with liberty to the Insurance Company to recover  

the same from the owner of the vehicle.

Prima facie, we are of the opinion if the Insurance  

Company proves that it has no liability to pay compensation  

to  the  claimants,  the  Insurance  Company  can  not  be  

compelled to make payment and later on recover it from the  

owner of the vehicle.

No doubt, there are some decisions which have taken  

the  view  that  even  if  the  insurance  company  has  no  

liability, yet it must pay and later on recover it from the  

owner of the vehicle. [See for example National Insurance  

Co. Ltd. vs. Yellamma & Another (2008) 7 SCC 526, Samundra  

Devi vs. Narendra Kaur (2008) 9 SCC 100 (vide para 16),  

Oriental Insurance Co. vs. Brij Mohan (2007) 7 SCC 56 (vide  

para 13), New India Insurance Co. vs. Darshan Devi (2008) 7  

SCC 416 (vide para 21), etc.].

We have some reservations about the correctness of

the aforesaid decisions of this Court.  If the insurance  

company  has  no  liability  to  pay  at  all,  then,  in  our  

opinion, it can not be compelled by order of the Court in  

exercise  of  its  jurisdiction  under  Article  142  of  the  

Constitution of India to pay the compensation amount and  

-3-

later on recover it from the owner of the vehicle.  In our  

view, Article 142 of the Constitution of India does not  

cover such type of cases.  When a person has no liability  

to pay at all how can it be compelled to pay?  It may take  

years for the insurance company to recover the amount from  

the owner of the vehicle, and it is also possible that for  

some reason the recovery may not be possible at all.  

Hence, we direct that the papers of this case be  

placed  before  Hon'ble  the  Chief  Justice  of  India  for  

constituting  a  larger  bench  to  decide  the  following  

questions:

“(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 vehcile.

(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?”

(Parveen Kr. Chawla) Court Master

( Indu Satija) Court Master

[Reportable Signed Order is placed on the File]

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

PETITION(S) FOR SPECIAL LEAVE TO APPEAL(C)......./2009 [CC NO.10993/2009]

NATIONAL INSURANCE CO. LTD. ..PETITIONER

VERSUS

PARVATHNENI & ANOTHER ..RESPONDENTS

O R D E R

Delay  of  65  days  in  filing  the  Special  Leave  

Petition is condoned.

Issue notice.

Until further orders, the operation of the impugned  

order shall remain stayed.

In  this  case,  the  allegation  of  the  petitioner-

Insurance  Company  is  that  there  was  no  valid  insurance  

coverage on the date of the accident i.e. 30th November,  

2003.  The cheque towards premium for renewal of the policy  

was  issued  on  29th November,  2003  but  the  same  was  

dishonoured.   Hence,  the  contention  of  the  Insurance  

Company is that it has no liability to pay any compensation  

amount  to  the  claimants  since  there  was  no  insurance  

coverage on the date of the accident.

Despite  this,  the  High  Court  has  directed  the

insurance  company  to  pay  the  compensation  amount  to  the  

claimants with liberty to the Insurance Company to recover  

-2-

the same from the owner of the vehicle.

Prima facie, we are of the opinion if the Insurance  

Company proves that it has no liability to pay compensation  

to  the  claimants,  the  Insurance  Company  can  not  be  

compelled to make payment and later on recover it from the  

owner of the vehicle.

No doubt, there are some decisions which have taken  

the  view  that  even  if  the  insurance  company  has  no  

liability, yet it must pay and later on recover it from the  

owner of the vehicle. [See for example National Insurance  

Co. Ltd. vs. Yellamma & Another (2008) 7 SCC 526, Samundra  

Devi vs. Narendra Kaur (2008) 9 SCC 100 (vide para 16),  

Oriental Insurance Co. vs. Brij Mohan (2007) 7 SCC 56 (vide  

para 13), New India Insurance Co. vs. Darshan Devi (2008) 7  

SCC 416 (vide para 21), etc.].

We have some reservations about the correctness of  

the aforesaid decisions of this Court.  If the insurance  

company  has  no  liability  to  pay  at  all,  then,  in  our  

opinion, it can not be compelled by order of the Court in  

exercise  of  its  jurisdiction  under  Article  142  of  the  

Constitution of India to pay the compensation amount and  

later on recover it from the owner of the vehicle.  In our  

view, Article 142 of the Constitution of India does not

cover such type of cases.  When a person has no liability  

to pay at all how can it be compelled to pay?  It may take  

years for the insurance company to recover the amount from  

the owner of the vehicle, and it is also possible that for  

some reason the recovery may not be possible at all.  

-3-

Hence, we direct that the papers of this case be  

placed  before  Hon'ble  the  Chief  Justice  of  India  for  

constituting  a  larger  bench  to  decide  the  following  

questions:

“(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.

(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?”

...........................J. [MARKANDEY KATJU]

NEW DELHI;    ...........................J. AUGUST 31, 2009.    [ASOK KUMAR GANGULY]