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CASE NO.: Appeal (civil)  3055 of 2008

PETITIONER: Oriental Insurance Co. Ltd

RESPONDENT: Zaharulnisha & Ors

DATE OF JUDGMENT: 29/04/2008

BENCH: S. B. Sinha & Lokeshwar Singh Panta

JUDGMENT: J U D G M E N T REPORTABLE

CIVIL APPEAL NO. 3055  OF 2008 [Arising out of SLP [C) No.21038 of 2006]

Lokeshwar Singh Panta, J.

1.      Leave granted. 2.      This appeal is against the judgment dated 1st July, 2006  passed by the High Court of Judicature at Allahabad whereby  and whereunder, appeal filed by the Oriental Insurance  Company Limited challenging the award dated 26.04.2006 of  the Motor Accident Claims Tribunal/Additional District Judge  Khushi Nagar in MAC No. 98/2002,  has been dismissed.   3.      Briefly stated the facts leading to the filing of the appeal  are as under:- On 23.07.2001 at about 6:00 p.m. one Shukurullah was  going from Kasya Courts to his village Shivpur on a bicycle.  A  two wheeler scooter, bearing registration No. UP 57 - 5901,  being driven by one Ram Surat in a rash and negligent  manner hit Shukurullah near Sapha P.S. Kasya and as a  result thereof, Shurkurullah sustained grievous injuries and  died.  The ill-fated scooter was owned by Vakilrao \026  respondent No. 8 herein.  The legal representatives of deceased  Shukurullah lodged a Claim Petition No. 98/2002 before the  Motor Accident Claims Tribunal, Khushi Nagar/Additional  District Judge and they claimed compensation for the death of  their sole bread earner.   4.      By its award dated 26.04.2006, Motor Accident Claims  Tribunal held that the accident was due to rash and negligent  driving of the scooter by Ram Surat.  It awarded a sum of Rs.  3,01,500/- as compensation with interest at 9% per annum in  favour of the claimants and against the second respondent,  owner of the scooter and appellant - insurance company.  The  appellant \026 insurance company was directed to pay the  amount of compensation.  The appellant \026 insurance company  filed an appeal before the High Court.  Before the High Court it  was contended that as the driver Ram Surat was holding  licence for driving Heavy Motor Vehicle (HMV) only, therefore,  he had no valid licence to drive a two wheeler scooter which is  totally a different class of vehicle in terms of Section 10 of the  Motor Vehicles Act, 1988 [hereinafter referred to as ’the MV  Act’].  It was contended that in view of the breach of the  provisions of the MV Act, the appellant \026 insurance company  cannot be held liable to satisfy the award in terms of Section  149(2) of the MV Act. 5.      The High Court without noticing the contention of the

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appellant \026 insurance company passed short and unreasoned  order, which reads as under:- "Heard Sri S.C. Srivastava, learned counsel for  the appellant and perused the record.

Having considered the submission of the learned  counsel for the appellant, we are of the view that  this appeal has got no force and is dismissed  summarily.  However, the statutory deposits so  made before this Court be remitted to the Claims  Tribunal within three weeks."

6.      Hence, the insurance company has filed this appeal. 7.      Despite service of notice, respondent No. 2 \026 owner of the  vehicle has chosen not to put in appearance and contest the  appeal. 8.      Shri M.K. Dua, learned counsel for the appellant \026  insurance company contended that the High Court grossly  erred in dismissing the statutory appeal of the insurance  company without considering the legal question involved in  the present case.  He contended that the insurance company  cannot be held liable to pay the amount of compensation for  the default of the driver of the scooter who was not holding a  valid licence and the liability to indemnify claimants is the  responsibility of the owner of the vehicle involved in the  accident. 9.      Shri Girijesh Kumar Mall, learned counsel appearing on  behalf of the claimants, contended that the claimants should  not be made to suffer for the inter se dispute between the  appellant \026 insurance company and respondent No. 8 \026 owner  of the vehicle in regard to their liability to pay the amount of  compensation to the claimants.  According to the learned  counsel, the amount of compensation as directed by the  Tribunal has to be released to the claimants and the appellant  \026 insurance company can realise the said amount from the  owner of the vehicle in accordance with law.  10.     In order to appreciate the rival contentions of the learned  counsel for the parties, the legal question that needs to be  considered by us is :  Whether the appellant \026 insurance  company could be held liable to pay the amount of  compensation for the default of the scooterist who was not  holding licence for driving two wheeler scooter but had driving  licence of different class of vehicle in terms of Section 10 of the  MV Act? 11.     For the purpose of determination of the above said issue,  we may notice relevant provisions of the MV Act.  Section 2 of  the MV Act deals with definitions.  Sub-section 9 of Section 2  defines ’driver’ to include \026  ’in relation to a motor vehicle which is drawn by  another motor vehicle, the person who acts as a  steersman of the drawn vehicle.’   

Sub-section (10) of Section 2 defines ’driving  licence’ to mean -’the licence issued by a  competent authority under Chapter II  authorizing the person specified therein to drive,  otherwise than as a learner, a motor vehicle or a  motor vehicle of any specified class or  description.’   

Section 3 in Chapter II of the MV Act prescribes necessity for  driving licence which reads as under:- "(1)  No person shall drive a motor vehicle in any  public place unless holds an effective driving

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licence issued to him authorising him to drive  the vehicle; and no person shall so drive a  transport vehicle [other than  [a motor cab or  motor cycle] hired for his own use or rented  under any scheme made under sub-section (2)  of section 75] unless his driving licence  specifically entitled him to do so.  

(2)  The conditions subject to which sub-section  (1) shall not apply to a person receiving  instructions in driving a motor vehicle shall be  such as may be prescribed by the Central  Government.

12.     Section 5 prescribes that no owner or person in charge of  a motor vehicle shall cause or permit any person who does not  satisfy the provisions of Section 3 or Section 4 to drive the  vehicle.  Driving licence has to be granted by the licencing  authority having jurisdiction in the area to any person who is  not, for the time being, disqualified of holding or obtaining a  driving licence in terms of Section 9 of the MV Act.  Section 10  prescribes forms and contents of the licences to drive which  reads as under:- (1)         Every learner’s license and driving  licence, except a driving licence issued  under Section 18, shall be in such  form and shall contain such  information as may be prescribed by  the Central Government.

(2)     A learner’s licence or, as the case may  be, driving licence shall also be  expressed as entitling the holder to  drive a motor vehicle of one or more of  the following classes, namely:- (a)       motor cycle without gear; (b)     motor cycle with gear; (c)     invalid carriage; (d)     light motor vehicle;  [e) transport vehicle;  (i)    road\026roller; (j)   motor vehicle of a specified description."

13.     Driving licence has to be issued by the licencing  authority on presentation of the application in Form IV as  prescribed by Rule 14 of the Motor Vehicle Rules, 1989.  The  application form shall be accompanied by documents specified  in the said Rule.  The applicant has to apply for a licence in  terms of Form IV enabling him to drive a particular vehicle of  the description as specified in Section 10 of the MV Act, 1988.   The licencing authority shall grant driving licence to the  applicant in terms of Form VI and Rule 16(1) of the Central  Motor Vehicle Rules, 1989. 14.     Sub-section (1) of Section 149 casts a liability upon the  insurer to pay to the person entitled to the benefit of the  decree "as if he was the judgment debtor", that is, the Statute  raises a legal fiction to the effect that for the said purpose the  insurer would be deemed to be a judgment-debtor in respect of  the liability of the insurer in respect of third party risks. 15.     It is beyond any doubt or dispute that under Section 149  (1) of the MV Act, insurer, to whom notice of bringing of any  proceeding for compensation has been given, can defend the  action on any of the grounds mentioned therein.  A three- Judge Bench of this Court in National Insurance Company

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Limited v. Swaran Singh [(2004) 3 SCC 297] has extensively  dealt with the meaning, application and interpretation of  various provisions, including Ss. 3(2), 4(3), 10(2) and 149 of  the MV Act.  In paragraph 47 of the judgment, the learned  Judges have held that if a person has been given a licence for  a particular type of vehicle as specified therein, he cannot be  said to have no licence for driving another type of vehicle  which is of the same category but of different type.  As for  example, when a person is granted a licence for driving a light  motor vehicle  he can drive  either a car or a jeep and it is not  necessary that he must have driving licence both for car and  jeep separately.  In paragraph 48, it is held as under: "Furthermore, the insurance company with a  view to avoid its liabilities is not only required to  show that the conditions laid down under  Section 149(2)(a) or (b) are satisfied but is  further required to establish that there has been  a breach on the part of the insured.  By reason  of the provisions contained in the 1988 Act, a  more extensive remedy has been conferred upon  those who have obtained judgment against the  user of a vehicle and after a certificate of  insurance  is delivered in terms of Section  147(3).  After a third party has obtained a  judgment against any person insured by the  policy in respect of a liability required to be  covered by Section 145, the same must be  satisfied by the insurer, notwithstanding that  the insurer may be entitled to avoid or to cancel  the policy or may in fact have done so.  The  same obligation applies in respect of such a  liability but who would have been covered if the  policy had covered the liability of all persons,  except that in respect of liability for death or  bodily injury."

16.     The judgment proceeds to hold that under the MV Act,  holding of a valid driving licence is one of the conditions of  contract of insurance.  Driving of a vehicle without a valid  licence is an offence.  However, the question herein is whether  a third party involved in an accident is entitled to the amount  of compensation granted by the Motor Accidents Claims  Tribunal although the driver of the vehicle at the relevant time  might not have a valid driving licence but would be entitled to  recover the same from the owner or driver thereof.  It is trite  that where the insurers, relying upon the provisions of  violation of law by the assured,  take an exception to pay the  assured or a third party, they must prove a wilful violation of  the law by the assured.  In some cases, violation of criminal  law, particularly violation of the provisions of the MV Act, may  result in absolving the insurers but, the same may not  necessarily hold good in the case of a third party.  In any  event, the exception applies only to acts done intentionally or  "so recklessly as to denote that the assured did not care what  the consequences of his act might be".  The provisions of sub- sections (4) and (5) of Section 149 of the MV Act may be  considered as to the liability of the insurer to satisfy the decree  at the first instance.  The liability of the insurer is a statutory  one.  The liability of the insurer to satisfy the decree passed in  favour of a third party is also statutory. 17.     The learned judges having considered the entire material  and relevant provisions of the MV Act and conflict of decisions  of various High Courts and this Court on the question of  defences available to the insurance companies in defending  the claims of the victims of the accident arising due to the

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harsh and negligent driving of the vehicle which is insured  with the insurance companies, proceeded to record the  following summary of findings. (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) Insurer is entitled to raise a defence in a  claim petition filed under Section 163A 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 driver or invalid driving  licence of the driver, as contained in Sub- section (2)(a)(ii) of Section 149, have to be  proved to have been committed by the insured  for avoiding liability by the insurer. Mere  absence, fake or invalid driving licence or  disqualification of the driver for driving at the  relevant time, are not in themselves defences  available to the insurer against either the  insured or the third parties. To avoid its liability  towards 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 duly licensed driver or one  who was not disqualified to drive at the relevant  time, (iv) The insurance companies are,  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 said burden would be discharged,  inasmuch as the same would depend upon the  facts and circumstance 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  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 insured under Section 149(2) of  the Act. (vii) The question as to whether the owner has  taken reasonable care to find out as to whether  the driving licence produced by the driver, (a  fake one or otherwise), does not fulfil the  requirements of law or not will have to be

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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 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 Se award made thereon is  enforceable and executable in the same manner  as provided in Section 174 of the Act for  enforcement and execution of the award in  favour of the claimants. (x) Where on adjudication of the claim under the  Act the tribunal arrives at a conclusion that the  insurer has satisfactorily proved its defence in  accordance with the provisions of Section 149(2)  read with Sub-section (7), as interpreted by this  Court above, the Tribunal can direct that the  insurer is liable to be reimbursed by the insured  for the compensation and other amounts which  it has been compelled to pay to the third party  under the award of the tribunal Such  determination of claim by the Tribunal will be  enforceable and the money found due to the  insurer from the insured will be recoverable on  a certificate issued by the tribunal to the  Collector in the same manner under Section  174 of the Act as arrears of land revenue. The  certificate will be issued for the recovery as  arrears of land revenue only if, as required by  Sub-section (3) of Section 168 of the Act the  insured fails to deposit the amount awarded in  favour of the insurer within thirty days from the  date of announcement of the award by the  tribunal. (xi) The provisions contained in Sub-section (4)  with proviso thereunder and Sub-section (5)  which are intended to cover specified  contingencies mentioned therein to enable the  insurer to recover amount paid under the  contract of insurance on behalf of the insured  can be taken recourse of by the Tribunal and be  extended to claims and defences of insurer  against 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. 18.     In the light of the above-settled proposition of law, the

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appellant \026 insurance company cannot be held liable to pay  the amount of compensation to the claimants for the cause of  death of Shukurullah in road accident which had occurred  due to rash and negligent driving of scooter by Ram Surat who  admittedly had no valid and effective licence to drive the  vehicle on the day of accident.  The scooterist was possessing  driving licence of driving HMV and he was driving totally  different class of vehicle which act of his is in violation of  Section 10(2) of the MV Act.   19.     In the result, the appeal is allowed to the limited extent  and it is directed that the appellant \026 insurance company  though not liable to pay the amount of compensation, but in  the nature of this case it shall satisfy the award and shall have  the right to recover the amount deposited by it along with  interest from the owner of the vehicle, viz. respondent No. 8,  particularly in view of the fact that no appeal was preferred by  him nor has he chosen to appear before this Court to contest  this appeal.  This direction is given in the light of the  judgments of this Court in National Insurance Co. Ltd. v.  Baljit Kaur and Others [(2004) 2 SCC 1] and Deddappa  and Others v. Branch Manager, National Insurance Co.  Ltd. [(2008) 2 SCC 595].   20.     The appeal is, accordingly, allowed in the aforesaid terms  with no order as to costs.