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CASE NO.: Appeal (civil)  5825 of 2006

PETITIONER: THE ORIENTAL INSURANCE COMPANY LIMITED

RESPONDENT: MEENA VARIYAL  & ORS

DATE OF JUDGMENT: 02/04/2007

BENCH: C.K. THAKKER & P.K. BALASUBRAMANYAN

JUDGMENT: J U D G M E N T  

P.K. BALASUBRAMANYAN, J.

1.              One Suresh Chandra Variyal was employed as a  Regional Manager in M/s Apace Savings and Mutual Benefits  (India) Ltd., the owner of a motor vehicle, respondent No.3  herein.  Variyal was provided with a car by the employer.   The  vehicle was insured with the appellant company in terms of  the Motor Vehicles Act, 1988.  There was no special contract.   On 14.6.1999, the vehicle met with an accident.   Suresh  Chandra Variyal, died.  The widow and daughter of Suresh  Chandra Variyal, filed a claim petition under Section 166 of  the Motor Vehicles Act, 1988, before the Motor Accidents  Claims Tribunal, Nainital.  Therein, they claimed  compensation to the tune of Rs.15 lakhs.   According to the  claim, the deceased was driving along with his ’companion’  Mahmood Hasan after completing his work for the employer.   At about 11.30 pm the car collided with a tree due to the rash  and negligent driving of the driver.  The car was being driven  by Mahmood Hasan at the time of the accident.   The deceased  was an occupant of the car.   The car was being used for the  business and for the benefit of the employer of the deceased at  the time of the accident.  The deceased was earning Rs.  9,000/- per month.  He had a bright career ahead.  Mahmood  Hasan had lodged a first information report the same day  (reiterated in the counter affidavit filed in this Court) giving  wrong facts to escape from any prosecution.  It was not  specified in the application as to what was the wrong fact or  what were the wrong facts mentioned in the complaint filed by  Mahmood Hasan.  The claimants as dependants were entitled  to compensation as claimed.

2.              The claim was filed against the employer, the owner  of the motor vehicle and against the insurance company.   Mahmood Hasan, who was allegedly driving the car and that  too negligently, at the time of the accident, was not impleaded.   No reason was given in the claim for his not being impleaded.    The owner of the car, the company that employed the  deceased, did not appear and did not file any written  statement.   The insurance company filed a written statement.    It pleaded that the driver and the owner of the vehicle have  colluded and the alleged driver of the car had not been  impleaded.   As a matter of fact, the deceased himself was  driving the vehicle.  Hence he was not entitled to claim any  compensation since the accident occurred on account of his  own negligence.   The insurance company had no liability.   

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The compensation claimed was exorbitant and the claim was  liable to be dismissed.

3.              In support of the claim, the wife of Variyal was  examined as P.W.1 and another person, who was allegedly  travelling in the car when it met with the accident, was  examined as P.W. 2.   P.W. 1 asserted that the vehicle was  being driven at the time of the accident by Mahmood Hasan  and her husband was travelling in the car.  This was sought to  be supported by P.W. 2 who claimed that he was also  travelling in the same car at the time of the accident.  He gave  evidence that Variyal was employed as a Regional Manager  with the owner of the car, M/s Apace Savings and Mutual  Benefits (India) Ltd.  P.W. 2 also gave evidence that sometimes  Variyal himself used to drive the vehicle but Mahmood Hasan  usually drove the car.  Mahmood Hasan had lodged a First  Information Report at 4.40 p.m. on the day of the accident.  Therein, Mahmood Hasan had stated that Variyal was driving  the car at the time of the accident.  

4.              No independent evidence was adduced to show what  exactly was the salary that was being earned by Variyal from  his employer.  The employer was a limited liability company  and in the normal course, should have been maintaining the  relevant records showing the salary paid to a Regional  Manager like Variyal.  No attempt was made to get them  produced.  The widow contented herself by asserting in her  oral evidence that Variyal was earning a salary of Rs. 9,000/-  per month. The Motor Accident Claims Tribunal held that the  evidence disclosed that Variyal was driving the vehicle since  what was more acceptable was the first version regarding the  accident and not the oral assertions of P.Ws. 1 and 2 in  support of the claim.  It also held that Variyal was not holding  a valid driving licence when he drove the car.  Purporting to  accept the interested, unsupported version of P.W. 1 that the  income of her husband was Rs. 9,000/- per month, the  Tribunal calculated the dependency at Rs. 6,000/- per month  and applying the multiplier of 10, arrived at the compensation  payable as Rs. 7,20,000/-.  The Tribunal held that the  claimants were entitled to receive the amount from the owner  of the vehicle, the employer, but the insurance company was  not liable, since the vehicle was being driven by the deceased  himself who was an employee of the owner of the car and the  policy of insurance did not cover such an employee.  Thus, the  claim was ordered directing the owner of the car to pay the  claimant a sum of Rs. 7,20,000/- with interest thereon.  

5.              The claimants filed an appeal before the High Court.   The insurance company, which had been exonerated by the  Tribunal, alone resisted the appeal. The owner of the vehicle  kept away.  The claimants, the appellants before the High  Court, contended that the Tribunal was in error in finding that  the insurance company was not liable and in not granting  them a decree against the insurance company.  The insurance  company pointed out that the deceased was not a third party  covered by the insurance policy, was an employee of the owner  of the vehicle and was not covered by the policy.  Even  otherwise, he was driving the car himself as found by the  Tribunal and since the accident was caused by his own  negligence, the insurance company was not liable.   

6.              The only argument attempted on behalf of the  claimants, the appellants in the High Court, was that in the  light of the decision of this Court in National Insurance Co.  Ltd. Vs. Swaran Singh & Ors. [(2004) 3 S.C.C. 297], the

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insurance company was liable to pay the amount awarded  even if there was breach of a policy condition and if there was  a dispute between the insured and the insurer, it had to be  fought elsewhere and they cannot be denied the benefit of the  insurance.  The insurance company pointed out that the ratio  in Swaran Singh (supra) had no application to the case and in  the face of the finding that the deceased was himself driving  the vehicle belonging to his employer, the insurance company  had no liability. There was no special contract and since it was  only a policy in terms of the Motor Vehicles Act, the insurance  company cannot be asked to pay the amount awarded which  was even otherwise not supported by any admissible or  acceptable evidence.  The High Court, stating that they had in  so many cases held, in view of the ratio in Swaran Singh  (supra), that it is not open to the insurance company to avoid  liability under the Act, simply directed the insurance company  to pay the amount as ordered by the Tribunal, leaving it to the  insurance company to take recourse to recover the amount  from the insured in accordance with the directions of this  Court in Swaran Singh (supra).   

7.              We must say that one would have expected the High  Court to apply its mind to the question arising, in a better  manner and to specifically answer the question that arose for  decision in the case.  For instance, we may observe that it has  not reversed the finding of the Tribunal that the deceased was  himself driving the vehicle.  Then, what was the position?  The  position was that a Regional Manager of the Company, which  was owner of the vehicle, was himself driving the vehicle of the  Company and during the course of it, he died in an accident,  whether the accident occurred due to his negligence or  otherwise.  It appears to us that mere going by some decision  or other, without appreciating the facts in a given case, in the  light of the law, if any, declared by this court, does not lead a  court or Tribunal to a correct conclusion in the normal course.  

8.              On behalf of the insurance company, the appellant,  it is contended that the policy was only one in terms of the  Motor Vehicles Act, 1988 and the policy did not cover the  employee of the owner, the insured, who was driving the  vehicle while attending to the business of the employer  company.  The deceased was not "a third party" in terms of the  policy or in terms of the Act.  The Act did not provide for  statutory coverage of such a person.  This would be the  position even if the deceased was only travelling in the car in  his capacity as a Regional Manager of the owner \026 Company  and the vehicle was being driven by Mahmood Hasan as  claimed.  Since the High Court has not interfered with the  finding of the Tribunal that the deceased was himself driving  the car at the time of the accident and that he did not have a  valid licence to drive a vehicle, there was absolutely no  question of the insurance company being made liable under  any principle of law.  It was also submitted that without  impleading Mahmood Hasan who was allegedly driving the car,  the claim ought not to have been entertained, especially since  there was controversy as to whether the car was being driven  by Mahmood Hasan or by the deceased as sought to be  projected by the claimants. The claimants were obliged to  prove the negligence of the driver and the principles of general  law in that regard, have not been jettisoned by the Motor  Vehicles Act.  On the other hand, the law expounded by this  Court earlier had been accepted by the Legislature by enacting  Section 163A of the Act.  Thus, this was a case where High  Court grossly erred in directing the insurance company to pay  the compensation decreed by the Tribunal, which in itself was

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a figure unsupported by any legal evidence and in purporting  to apply the ratio of Swaran Singh (supra) to compel the  insurance company to pay the amount awarded and then to  have recourse to the insured.  The learned counsel for the  claimant - respondent on the other hand submitted that the  vehicle, at the relevant time, was being driven by Mahmood  Hasan and the Tribunal was wrong in entering a finding that  the deceased himself was driving the vehicle in the light of the  evidence of P.Ws. 1 and 2.  The burden was on the insurance  company, on the scheme of the Act, to show that it had no  liability and in that context to show that the deceased himself  was driving the vehicle and not Mahmood Hasan. Learned  counsel further submitted that this Court in Swaran Singh  (supra) has laid down the law and that principle applies in all  cases involving an insurance company and a policy issued by  the Company in terms of the Act and whenever there is an  award against the insured, the insurer is obliged to satisfy the  award and have recourse to the insured even if the insurance  company was really not liable under the policy.  He therefore  submitted that the High Court was justified in directing the  insurance company to pay the compensation.   He urged that  Chapter XI of the Act contained beneficent provisions to  protect the victims and the relevant sections should not be  construed restrictively.  

9.              Before we proceed to consider the main aspect  arising for decision in this Appeal, we would like to make  certain general observations.  It may be true that the Motor  Vehicles Act, insofar as it relates to claims for compensation  arising out of accidents, is a beneficent piece of legislation.  It  may also be true that subject to the rules made in that behalf,  the Tribunal may follow a summary procedure in dealing with  a claim.  That does not mean that a Tribunal approached with  a claim for compensation under the Act should ignore all basic  principles of law in determining the claim for compensation.  Ordinarily, a contract of insurance is a contract of indemnity.   When a car belonging to an owner is insured with the  insurance company and it is being driven by a driver employed  by the insured, when it meets with an accident, the primary  liability under law for payment of compensation is that of the  driver. Once the driver is liable, the owner of the vehicle  becomes vicariously liable for payment of compensation. It is  this vicarious liability of the owner that is indemnified by the  insurance company.  A third party for whose benefit the  insurance is taken, is therefore entitled to show, when he  moves under Section 166 of the Motor Vehicles Act, that the  driver was negligent in driving the vehicle resulting in the  accident; that the owner was vicariously liable and that the  insurance company was bound to indemnify the owner and  consequently, satisfy the award made. Therefore, under  general principles, one would expect the driver to be  impleaded before an adjudication is claimed under Section  166 of the Act as to whether a claimant before the Tribunal is  entitled to compensation for an accident that has occurred  due to alleged negligence of the driver.  Why should not a  Tribunal insist on the driver of the vehicle being impleaded  when a claim is being filed?  As we have noticed, the relevant  provisions of the Act are not intended to jettison all principles  of law relating to a claim for compensation which is still based  on a tortious liability.  The Tribunal ought to have, in the case  on hand, directed the claimant to implead Mahmood Hasan  who was allegedly driving the vehicle at the time of the  accident.  Here, there was also controversy whether it was  Mahmood Hasan who was driving the vehicle or it was the  deceased himself.   Surely, such a question could have been

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decided only in the presence of Mahmood Hasan who would  have been principally liable for any compensation that might  be decreed in case he was driving the vehicle.  Secondly, the  deceased was employed in a limited company.  It was  necessary for the claimants to establish what was the monthly  income and what was the dependency on the basis of which  the compensation could be adjudged as payable.  Should not  any Tribunal trained in law ask the claimants to produce  evidence in support of the monthly salary or income earned by  the deceased from his employer Company?  Is there anything  in the Motor Vehicles Act which stands in the way of the  Tribunal asking for the best evidence, acceptable evidence?   We think not.  Here again, the position that the Motor Vehicles  Act vis-‘-vis claim for compensation arising out of an accident  is a beneficent piece of legislation, cannot lead a Tribunal  trained in law to forget all basic principles of establishing  liability and establishing the quantum of compensation  payable.  The Tribunal, in this case, has chosen to merely go  by the oral evidence of the widow when without any difficulty  the claimants could have got the employer \026 company to  produce the relevant documents to show the income that was  being derived by the deceased from his employment.  Of  course, in this case, the above two aspects become relevant  only if we find the insurance company liable.  If we find that  only the owner of the vehicle, the employer of the deceased  was liable, there will be no occasion to further consider these  aspects since the owner has acquiesced in the award passed  by the Tribunal against it.   

10.             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 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.  As we understand Section 147 (1) of the Act, an  insurance policy thereunder need not cover the liability in

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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 forgoing 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 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  (h) 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.   

11.             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.  On this plain understanding of Section 147, we find it  difficulty to hold that the insurance company, in the case on  hand, was liable to indemnify the owner, the employer  Company, the insured, in respect of the death of one of its  employees, who according to the claim, was not the driver.  Be  it noted that the liability is not one arising under the  Workmen’s Compensation Act, 1923 and it is doubtful, on the  case put forward by the claimant, whether the deceased could  be understood as a workman coming within the Workmen’s  Compensation Act, 1923. Therefore, on a plain reading of  Section 147 of the Act, it appears to be clear that the  insurance company is not liable to indemnify the insured in  the case on hand.  

12.             The argument that the proviso does not keep out  employees from coverage though the claims under the  Workmen’s Compensation Act are specified, cannot be  accepted on the plain language of the proviso.  The proviso  enacts an exemption and carves out an exception to that  exemption.  The suggested interpretation would result in  ignoring the effect of the language employed by the proviso,  exempting the owner from covering his employees under  insurance except in cases where the liability in respect of them  is, one arising under the Workmen’s Compensation Act.   Obviously, as determined by that Tribunal.

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13.             We shall now examine the decision in Swaran  Singh (supra) on which practically the whole of the arguments  on behalf of the claimants was rested.  On examining the  facts, it is found that, that was a case which related to a claim  by a third party.  In claims by a third party, there cannot be  much doubt that once the liability of the owner is found, the  insurance company is liable to indemnify the owner, subject of  course, to any defence that may be available to it under  Section 149(2) of the Act.  In a case where the liability is  satisfied by the insurance company in the first instance, it  may have recourse to the owner in respect of a claim available  in that behalf.   Swaran Singh (supra) was a case where the  insurance company raised a defence that the owner had  permitted the vehicle to be driven by a driver who really had  no licence and the driving licence produced by him was a fake  one.  Their Lordships discussed the position and held  ultimately that a defence under Section 149(2)(a)(ii) of the Act  was available to an insurer when a claim is filed either under  Section 163A or under Section 166 of the Act.   The breach of  a policy condition has to be proved to have been committed by  the insured for avoiding liability by the insurer.  Mere absence  of or production of 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 party.  The insurance company  to avoid liability, must not only establish the available defence  raised in the concerned proceeding but must also establish  breach on the part of the owner of the vehicle for which the  burden of proof would rest with the insurance company.   Whether such a burden had been discharged, would depend  upon the facts and circumstances of each case. Even when the  insurer, is able to prove breach on the part of the insured  concerning a policy condition, the insurer would not be  allowed to avoid its liability towards the insured unless the  said breach of condition is so fundamental as to be found to  have contributed to the cause of the accident. The question  whether the owner has taken reasonable care to find out  whether the driving licence produced by the driver was fake or  not, will have to be determined in each case.  If the vehicle at  the time of the accident was driven by a person having a  learner’s licence, the insurance company would be liable to  satisfy the award.  The amount that may be awarded to the  insurance company against the insurer in an appropriate case  could be recovered even by way of the enforcement of the very  award. The insurance company had to satisfy the claim of the  insured in cases where a defence under Section 149(2) has  been established by the Company in terms of a fake licence or  the learner’s licence.  Their Lordships distinguished Malla  Prakasarao Vs. Malla Janaki & Ors. [(2004) 3 S.C.C. 343]  wherein it was held that the insurance company had no  liability to pay any compensation where an accident resulted  by a vehicle being driven by a driver without a driving licence.    In other words, a distinction between a case of no licence and  a case of licence which turned out to be fake or deficient was  drawn and the liability was held to stand on different footings.   

14.             It is difficult to apply the ratio of this decision to a  case not involving a third party. The whole protection provided  by Chapter XI of the Act is against third party risk. Therefore,  in a case where a person is not a third party within the  meaning of the Act, the insurance company cannot be made  automatically liable merely by resorting to the Swaran Singh  (supra) ratio.  This appears to be the position. This position  was expounded recently by this Court in National Insurance  Co. Ltd. Vs. Laxmi Narain Dhut [2007 (4) SCALE 36].  This

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Court after referring to Swaran Singh (supra) and discussing  the law summed up the position thus: "In view of the above analysis the following  situations emerge:

1.      The decision in Swaran Singh’s case  (supra) has no application to cases  other than third party risks.  

2.      Where originally the licence was a  fake one, renewal cannot cure the  inherent fatality.

3.      In case of third party risks the  insurer has to indemnify the  amount and if so advised, to recover  the same from the insured.  

4.      The concept of purposive  interpretation has no application to  cases relatable to Section 149 of the  Act.  

The High Courts/Commissions shall now  consider the mater afresh in the light of the  position in law as delineated above."

We are in respectful agreement with the above view.                   15.             In New India Assurance Co. Ltd.  Vs. Asha Rani  and others [(2003) 2 S.C.C 223) this Court had occasion to  consider the scope of the expression "any person" occurring in  Section 147 of the Act.  This Court held: "that the meaning of the words "any person"  must also be attributed having regard to the  context in which they have been used i.e. " a  third party".  Keeping in view the provisions of  the 1988 Act we are of the opinion that as the  provisions thereof did not enjoin any statutory  liability on the owner of a vehicle to get his  vehicle insured for any passenger travelling in  a goods vehicle, the insurers would not be  liable therefor."   

In other words, this Court clearly held that the apparently  wide words "any person" are qualified by the setting in which  they occur and that "any person" is to be understood as a  third party.

16.             In United India Insurance Co. Ltd., Shimla Vs.  Tilak Singh & Ors. [(2006) 4 S.C.C. 404 ], this Court made a  survey of the prior decisions and discountenanced an attempt  to confine the ratio of Asha Rani (supra).  This Court stated  that although the observations in Asha Rani were in  connection with carrying passengers in a goods vehicle, the  same would apply with equal force also to gratuitous  passengers in any other vehicle. This Court also noticed that  the decision to the contrary in New India Assurance Co. Vs.  Satpal Singh [(2000) 1 S.C.C. 237] was specifically overruled  in Asha Rani’s case (supra).  In other words, it was re- emphasised that a policy in terms of Section 147 of the Act is  not intended to cover persons other than third parties.

17.             The Court of Appeal in Cooper vs. Motor Insurers’  Bureau (1985 (1) Queen’s Bench Division 575) considered the

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interpretation of  Section 143 and 145 of the Road Traffic Act,  1972 corresponding to Section 146 and Section 147 of the Act.   The Court of Appeal held: "that Section 143(1) of the Act of the 1972  imposed an obligation on the owner to insure  against the risk of injury or death to third  parties resulting from the use by him or any  other person of his vehicle on the road; that  "third party risks" in section 143(1) did not  include risks to the driver of the vehicle at the  relevant time so that "any person" in section  145(3)(a) was therefore restricted to persons  other than the driver  of the vehicle and its  owner; and that, accordingly, since the liability  of the owner to the plaintiff was not one that  was required to be covered by a policy of  insurance by the Act of 1972, the Motor  Insurers’ Bureau were not liable under the  terms of the agreement to compensate the  plaintiff in the sum of the unsatisfied  judgment."                  18.             In Halsbury’s Laws of England, Fourth Edition, in  paragraph 761, the position as regards ’employees’ is stated as  follows: "A policy is not required to cover liability in  respect of the death of or bodily injury  sustained by a person in the employment of a  person insured by the policy where the death  or injury arises out of and in the course of that  employment.  This exclusion is framed in the  language of the Workmen’s Compensation Acts  and is presumably intended to reflect the well- established distinction in the insurance world  between public liability risks and employers’  liability risks.   The distinctions which are  involved are very finely drawn."

19.             In New India Assurance Co. Ltd. Vs. Rula & Ors.  [(2000) 3 S.C.C. 195], this Court postulated that the contract  of insurance in respect of motor vehicles has to be construed  in the light of Sections 146(1),147(5) and 149(1) of the Motor  Vehicles Act, 1988.  The manifest object of Section 146(1),  which contains a prohibition on the use of motor vehicles  without an insurance policy having been taken in accordance  with Chapter XI of the Act is to ensure that the third party,  who suffers injuries due to the use of the motor vehicle, may  be able to get damages from the owner of the vehicle and  recoverability of the damages may not depend on the financial  condition or solvency of the driver of the vehicle who had  caused the injuries.  Thus, any contract of insurance under  Chapter XI of the Motor Vehicles Act, 1988 contemplates a  third party who is not a signatory or a party to the contract of  insurance but is, nevertheless, protected by such contract.   That this was the object was reiterated in New India  Assurance Co. Shimla Vs. Kamla & Ors. [(2001) 4 S.C.C.  342], wherein it was stated that the raison d’etre for the  legislature making it prohibitory for motor vehicles being used  in public places without covering third-party risks by a policy  of insurance is to protect the members of the community who  become sufferers on account of accidents arising from the use  of motor vehicles.  The object of Chapter XI has thus always  been recognised as one intended to protect third parties as  understood in the context of the Act unless of course there is a

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special contract in respect of protection to others.  

20.             We are thus satisfied that based on the ratio in  Swaran Singh (supra), the insurance company cannot be  made liable in the case on hand to pay the compensation first  and to recover it from the insured, the owner of the vehicle.   The deceased being an employee not covered by the  Workmen’s Compensation Act, of the insured, the owner of the  vehicle, has not to be covered compulsorily under the Act and  only by entering into of a special contract by the insured with  the insurer could such a person be brought under coverage.   There is no case that there is any special contract in that  behalf in this case.  

21.             It was argued by learned counsel for the appellant  that since on the finding that the deceased was himself driving  the vehicle at the time of the accident, the accident arose due  to the negligence of the deceased himself and hence the  insurer is not liable for the compensation.  Even if the case of  the claimant that the car was driven by Mahmood Hasan was  true, then also, the claimant had to establish the negligence of  the driver before the insured could be asked to indemnify the  insured.  The decision in Minu B. Mehta & Anr. Vs.  Balkrishna Ramchandra Nayan & Anr. [(1977) 2 S.C.R. 886],  of a three Judge Bench of this Court was relied on in support.

22.             In that decision, this Court considered the question  whether in a claim for compensation under the Motor Vehicles  Act, 1939, proof of negligence was essential to support a claim  for compensation.  On the facts in that case, their Lordships  found that the appeal was liable to be dismissed subject to  certain directions issued therein.  But their Lordships, in the  light of the fact that the High Court had discussed the law on  the question and it was of some importance, felt that it was  necessary to state the position in law.  Noticing that the  liability of the owner of the car to compensate the victim in a  car accident due to negligent driving of his servant is based on  the law of tort, the court discussed the scheme of the Act of  1939 and the law on the question.  Regarding the view of the  High Court that it was not necessary to prove negligence, the  court held: "The reasoning of the two learned judges is  unacceptable as it is opposed to basic  principles of the owner’s liability for negligence  of his servant and is based on a complete  misreading of the provisions of Chapter VIII of  the Act.  The High Court’s zeal for what it  considered to be protection of public good has  misled it into adopting a course which is  nothing short of legislation."

Their Lordships also noticed that proof of negligence remained  the lynch pin to recover compensation.  Their Lordships  concluded by saying,  "We conclude by stating that the view of the  learned Judges of the High Court has no  support in law and hold that proof of  negligence is necessary before the owner or the  insurance company could be held to be liable  for the payment of compensation in a motor  accident claim case."

23.             Learned counsel  for the respondent contended that  there was no obligation on the claimant to prove negligence on  the part of the driver.  Learned counsel relied on Gujarat

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State Road Transport Corporation, Ahmedabad vs.  Ramanbhai Prabhatbhai and another (1987 (3) SCC 234) in  support.  In that decision, this Court clarified that the  observations in Minu B. Mehta’s case (supra) are in the  nature of obiter dicta.  But, this Court only proceeded to  notice that departures had been made from the law of strict  liability and the Fatal Accidents Act by introduction of Chapter  VIIA of the 1939 Act and the introduction of Section 92A  providing for compensation and the expansion of the provision  as to who could make a claim, noticing that the application  under Section 110A of the Act had to be made on behalf of or  for the benefit of all the legal representatives of the deceased.   This Court has not stated that on a claim based on negligence  there is no obligation to establish negligence.  This Court was  dealing with no-fault liability and the departure made from the  Fatal Accidents Act and the theory of strict liability in the  scheme of the Act of 1939 as amended.  This Court did not  have the occasion to construe a provision like Section 163A of  the Act of 1988 providing for compensation without proof of  negligence in contradistinction to Section 166 of the Act.   We  may notice that Minu B. Mehta’s case  was decided by three  learned Judges and the Gujarat State Road Transport  Corporation case was decided only by two learned Judges.   An obiter dictum of this Court may be binding only on the  High Courts in the absence of a direct pronouncement on that  question elsewhere by this Court.  But as far as this Court is  concerned, though not binding, it does have clear persuasive  authority.  On a careful understanding of the decision in  Gujarat State Road Transport Corporation (supra) we  cannot understand it as having held that in all claims under  the Act proof of negligence as the basis of a claim is jettisoned  by the scheme of the Act.  In the context of Sections 166 and  163A of the Act of 1988, we are persuaded to think that the so  called obiter observations in Minu B. Mehta’s case (supra)  govern a claim under Section 166 of the Act and they are  inapplicable only when a claim is made under Section 163A of  the Act.  Obviously, it is for the claimant to choose under  which provision he should approach the Tribunal and if he  chooses to approach the Tribunal under Section 166 of the  Act, we cannot see why the principle stated in Minu B.  Mehta’s case should not apply to him.  We are, therefore, not  in a position to accept the argument of learned counsel for the  respondents that the observations in Minu B. Mehta’s case  deserve to be ignored.

24.             We think that the law laid down in Minu B. Mehta  & Anr. Vs. Balkrishna Ramchandra Nayan & Anr.  (supra)  was accepted by the legislature while enacting the Motor  Vehicles Act, 1988 by introducing Section 163A of the Act  providing for payment of compensation notwithstanding  anything contained in the Act or in any other law for the time  being in force that the owner of a motor vehicle or the  authorised insurer shall be liable to pay in the case of death or  permanent disablement due to accident arising out of the use  of the motor vehicle, compensation, as indicated in the Second  Schedule, to the legal heirs or the victim, as the case may be,  and in a claim made under sub-section (1) of Section 163A of  the Act, the claimant shall not be required to plead or  establish that the death or permanent disablement in respect  of which the claim has been made was due to any wrongful act  or neglect or default of the owner of the vehicle concerned.   Therefore, the victim of an accident or his dependants have an  option either to proceed under Section 166 of the Act or under  Section 163A of the Act.  Once they approach the Tribunal  under Section 166 of the Act, they have necessarily to take

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upon themselves the burden of establishing the negligence of  the driver or owner of the vehicle concerned.  But if they  proceed under Section 163A of the Act, the compensation will  be awarded in terms of the Schedule without calling upon the  victim or his dependants to establish any negligence or default  on the part of the owner of the vehicle or the driver of the  vehicle.  

25.             In Pushpabai Purshottam Udeshi & Ors. Vs. M/s  Ranjit Ginning & Pressing Co. (P) Ltd. & Anr. [(1977) 3  S.C.R. 372], two of the learned judges who constituted the  Bench in Minu B. Mehta (supra) held that when a car is  driven by the owner’s employee on owner’s business, the  normal rule was that it was for the claimant for compensation  to prove negligence.  When the Manager of the owner while  driving the car on the business of the owner took in a  passenger, it would be taken that he had the authority to do  so, considering his position unless otherwise shown.  If due to  his negligent driving an accident occurred and the passenger  died, the owner would be liable for compensation.  The court  noticed that the modern trend was to make the master liable  for acts of his servant which may not fall within the expression  "in the course of his employment" as formerly understood.   With respect, we think that the extensions to the principle of  liability has been rightly indicated in this decision.

26.             On the facts of this case, there is no finding that  Mahmood Hasan, another employee of the owner was driving  the vehicle.  Even if he was, there is no finding of his  negligence.  The victim was the Regional Manger of the  Company that owned the car.  He was using the car given to  him by the Company for use.  Whether he is treated as the  owner of the vehicle or as an employee, he is not covered by  the insurance policy taken in terms of the Act --- without any  special contract --- since there is no award under the  Workmen’s Compensation Act that is required to be satisfied  by the insurer.  In these circumstances, we hold that the  appellant \026 Insurance Company is not liable to indemnify the  insured and is also not obliged to satisfy the award of the  Tribunal/Court and then have recourse to the insured, the  owner of the vehicle. The High Court was in error in modifying  the award of the Tribunal in that regard.  

27.             We therefore allow the appeal and reversing the  decision of the High Court, restore the award of the Tribunal  exonerating the appellant from liability.  We make no order as  to costs.